[New York Stock Market] Unemployment Data Exceeds Expectations... Tech Stocks Rally, S&P 500 Closes at All-Time High

The three major indices of the U.S. New York stock market all closed higher on the 8th (local time) as they awaited the upcoming Consumer Price Index (CPI) announcement and the Federal Reserve's (Fed) monetary policy decision next week. The rally in tech stocks was particularly notable as the stronger-than-expected weekly initial jobless claims bolstered expectations of a rate hold.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 168.59 points (0.5%) from the previous close to finish at 33,833.61. The large-cap S&P 500 index gained 26.41 points (0.62%) to 4,293.93, approaching the 4,300 level. The tech-heavy Nasdaq index closed up 133.63 points (1.02%) at 13,238.52.

Within the S&P 500, stocks related to technology, discretionary consumer goods, staples, and utilities rose, while energy, financials, real estate, and materials sectors declined. GameStop fell nearly 18% after disappointing quarterly results and news that activist investor Ryan Cohen was appointed as the new CEO. Amazon rose 2.49% as Wells Fargo, UBS, and others upgraded their investment ratings and price targets. Online car retailer Carvana surged 56% after releasing an optimistic outlook for Q2. Tesla continued its upward trend, gaining 4.58%.

[Image source=Reuters Yonhap News]

Investors closely monitored the market atmosphere ahead of next week's U.S. inflation data release and the June FOMC monetary policy decision. Barbara Doran, CEO of BD8 Capital Partners, told CNBC, "We are in a bit of a news vacuum. Earnings season is over, the debt ceiling issue has been resolved, and now we are waiting for the Fed next week," adding, "The Fed's guidance and how the CPI and Producer Price Index (PPI) will come out are really important."

The day's gains were driven by stronger-than-expected employment data. According to the U.S. Department of Labor, initial jobless claims last week totaled 261,000, an increase of 28,000 from the previous week. This is the highest level since October 20, 2021, and far exceeds Wall Street's forecast of 235,000 claims.

This was interpreted as a sign that the high-intensity tightening policy is gradually impacting the labor market, fueling expectations that the Fed may hold rates steady at next week's meeting. According to the CME FedWatch tool, the federal funds futures market currently prices in about a 73% chance that the Fed will keep rates unchanged this month, with about a 26% chance of a 0.25 percentage point hike.

After the release of the jobless claims data, the yield on the two-year U.S. Treasury note, which is sensitive to monetary policy, fell below the 4.5% level in the New York bond market. The 10-year Treasury yield dropped to around 3.71%. Ross Mayfield, investment strategy analyst at Baird, appeared on CNBC and said, "The Fed may feel more comfortable pausing rate hikes this month to keep options open for next month and beyond."

However, the market also noted caution as the Canadian central bank surprised with a rate hike following Australia's move this week, raising concerns that the Fed might also pursue further tightening due to persistent inflationary pressures. Therefore, the key focus will be on the inflation indicators such as CPI and PPI to be released next week.

Some analysts suggest that if the May CPI does not show a meaningful easing, the Fed's tightening stance could become even more hawkish. Mayfield referenced the Canadian central bank's decision to resume hikes after a pause, saying it "could add color to the Fed's decision." Currently, futures markets price in about a 50% chance of a rate hike in July following a hold in June.

The dollar index, which measures the value of the U.S. dollar against six major currencies, traded around 103.3, down more than 0.7% from the previous close. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's "fear gauge," fell more than 2% from the previous close, hitting an intraday low of 13.55, the lowest since February 14, 2020.

International oil prices declined amid reports that the U.S. denied being close to a nuclear deal with Iran. On the New York Mercantile Exchange, July delivery West Texas Intermediate (WTI) crude oil closed down $1.24 (1.71%) at $71.29 per barrel.