The three major indices of the U.S. New York stock market showed mixed trends in the early session on the 5th (local time), waiting for the release of the Federal Reserve's (Fed) June Federal Open Market Committee (FOMC) minutes in the afternoon. On the day the market resumed after the Independence Day holiday closure, investor sentiment was also confirmed to be subdued following China's service sector indicators falling short of expectations.
At around 10:35 a.m. at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average was trading at around 34,308, down 110.23 points (0.32%) from the previous session. The large-cap focused S&P 500 index was down 2.15 points (0.05%) at 4,453. Meanwhile, the tech-heavy Nasdaq index was up 27.73 points (0.20%) at 13,844.
Currently, in the S&P 500 index, all sectors except telecommunications, utilities, technology, and real estate are declining. Moderna is up more than 3% following news that it will soon sign an investment contract with China. AstraZeneca also rebounded nearly 3%. Rivian rose more than 1% on news that it delivered electric delivery vans produced under an Amazon order to Europe. Microsoft rose more than 1% as Wedbush predicted it would be the next $3 trillion market cap company, despite earlier reports that the Biden administration would regulate access to its cloud computing services for Chinese companies. On the other hand, Coinbase fell more than 2% after Piper Sandler downgraded its investment rating. Delivery company UPS is also down over 2% amid increased strike risks due to a breakdown in labor wage negotiations.
The market officially entered the second half of the year trading after the Independence Day holiday closure. The market was closed on the previous day, Independence Day, and closed early on Monday the 3rd. With China's service sector economic indicators showing weaker-than-expected results, investors are awaiting key data releases scheduled for this week. Honey Redha, a manager at PineBridge Investments, said, "China still plays a very important role in growth, which has global repercussions." Charu Chanana, a market strategist at Saxo Capital Markets, analyzed, "China's indicators bring renewed attention to slowing growth momentum and geopolitical uncertainties."
In particular, the June FOMC minutes scheduled for release this afternoon are expected to provide hints about the future direction of monetary policy. Economic media CNBC reported, "The decision to hold rates steady at the June FOMC was not surprising, but the signal (from the dot plot) that there will be at least two more hikes this year unsettled the market."
The minutes are expected to include internal discussions among Fed officials regarding the rate hold, reasons for raising the year-end rate forecast on the dot plot from 5.1% to 5.6% (median), and recent assessments of economic growth and inflation. On the same day in the afternoon, a speech by John Williams, president of the New York Federal Reserve Bank and the Fed's third-ranking official, is also scheduled.
Currently, the market consensus is that rate hikes will resume starting in July. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds (FF) futures market is pricing in nearly an 89% chance of a baby step (0.25 percentage point rate hike) in July. However, unlike the Fed's dot plot signaling two hikes this year, the rate futures market still favors a scenario of one hike followed by a pause.
Later this week, key June employment data closely watched by the Fed will be released. The employment report scheduled for the 7th is particularly crucial. Wall Street estimates that nonfarm payrolls increased by 240,000 in June compared to the previous month. The June unemployment rate is expected to be 3.6%. Prior to that, the ADP private sector report and Job Openings and Labor Turnover Survey (JOLTs) will also be released.
The U.S. factory orders for May, released today, were weak. According to the U.S. Department of Commerce, May factory orders rose 0.3% month-on-month, falling short of market expectations of 0.6%.
Currently, in the New York bond market, the 10-year Treasury yield is around 3.87%, and the 2-year Treasury yield, sensitive to monetary policy, is around 4.91%. The dollar index, which shows the value of the dollar against six major currencies, is steady around 103.
European stock markets are declining. Germany's DAX index is trading down 0.69%. The UK's FTSE index and France's CAC index are both down by about 0.8%.
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