[New York Stock Market] Nasdaq Rises 1.35% on Private Employment Slowdown and Treasury Yield Decline

The three major indices of the U.S. New York stock market all closed higher on the 4th (local time) as bond yields fell due to weaker-than-expected private employment data. International oil prices dropped more than 5%.

On the day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average rose 127.17 points (0.39%) from the previous session to close at 33,129.55. The large-cap S&P 500 index increased by 34.30 points (0.81%) to 4,263.75, and the tech-heavy Nasdaq index gained 176.54 points (1.35%) to finish at 13,236.01.

Among the S&P 500 sectors, all nine sectors except energy and utilities rose. Due to the drop in international oil prices, energy stocks fell more than 3%. Conversely, consumer discretionary, technology, communication, materials, and real estate sectors all rose over 1%. Tesla rose nearly 6% compared to the previous session. Apple closed slightly higher despite KeyBank’s downgrade of its investment rating. Microsoft, Amazon, and Nvidia also rose by more than 1%. Moderna gained over 1% on positive interim clinical results for its COVID-19 and flu combo vaccine. Leading energy stocks Devon Energy and Marathon Oil each fell by more than 5%.

[Image source=Reuters Yonhap News]

Investors closely watched the recent surge in bond yields along with the economic data released that day. According to ADP, private sector employment in the U.S. increased by 89,000 in September, significantly below the expected 150,000. This was also a clear slowdown compared to the August increase of 180,000. ADP Chief Economist Nela Richardson noted, "There has been a significant decline in job growth this month." This result contrasts with the previous day’s Job Openings and Labor Turnover Survey (JOLTs), which exceeded expectations.

With the ADP employment data falling short of expectations, the 10-year U.S. Treasury yield, which had surpassed 4.8% the previous day, declined. The 2-year yield, sensitive to monetary policy, dropped to around 5.05%, and the 30-year yield fell to about 4.86%. As the recently surging bond yields paused, stock prices experienced upward pressure. Ross Mayfield, investment strategy analyst at Baird, described the market that day as "a day of slight reprieve whenever there is strong momentum in one direction." Jamie Cox of Harris Financial Group said, "The market is being pulled by interest rates."

However, warnings about the rapid rise in bond yields continue in the market. Jeffrey Gundlach, CEO of DoubleLine Capital and known as the "Bond King," warned on X (formerly Twitter) that "the spread between the 2-year and 10-year yields has narrowed from 108 basis points a few months ago to 35 basis points," signaling a recession in the bond market. Typically, an inversion where short-term yields exceed long-term yields is considered a recession litmus test. The Wall Street Journal (WSJ) reported that "the surge in long-term Treasury yields threatens hopes for a soft landing," and if the recent rise in bond yields accompanied by stock declines and a strong dollar continues, it could significantly slow the U.S. and global economies next year and increase the risk of financial market collapse.

Now, investors’ attention is focused on the September employment report to be released on the 6th. The Federal Reserve (Fed) believes that to achieve its 2% inflation target, below-trend low growth and a cooling labor market are necessary. If employment data continue to exceed expectations strongly, concerns about Fed tightening will inevitably increase. Wall Street forecasts that nonfarm payrolls in September slowed to 163,000 compared to the previous month. The direction of the unemployment rate, which hit a high of 3.7% in August?the highest since February 2022?is also considered crucial. Weekly jobless claims will be released the following day.

The ISM Services PMI released that day was 53.6, down from the previous month but still above the baseline of 50, indicating continued expansion. The S&P Global Services PMI also remained in expansion territory at 50.1.

The dollar index, which measures the value of the U.S. dollar against six major currencies, fell to around 106.7. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street’s "fear gauge," dropped from 20 to about 18.5.

Oil prices plunged. On the New York Mercantile Exchange, November delivery West Texas Intermediate (WTI) crude closed at $84.22 per barrel, down $5.01 (5.61%) from the previous session. This was the lowest level since August 31. The decline is attributed to profit-taking following the meeting of the ministerial monitoring committee (JMMC) of OPEC and non-OPEC major oil producers (OPEC+). Additionally, news of rising U.S. gasoline inventories also pressured oil prices downward.