New York Stock Market Declines Early Ahead of Employment Report

The three major indices of the U.S. New York stock market showed a decline in early trading on the 5th (local time), ahead of the employment report release that could impact the Federal Reserve's (Fed) monetary policy.

At around 10:55 a.m. at the New York Stock Exchange, the Dow Jones Industrial Average was trading at around 33,016, down 113.14 points (0.34%) from the previous close. The S&P 500, which focuses on large-cap stocks, fell 29.96 points (0.7%) to 4,233, while the tech-heavy Nasdaq dropped 132.82 points (1.0%) to 13,103.

Currently, all sectors except energy within the S&P 500 are in decline. Electric vehicle maker Rivian fell nearly 18% after releasing disappointing earnings guidance. Clorox also dropped over 8% due to weak guidance and Raymond James downgrading its investment rating. ExxonMobil showed a decline of over 1%. Major tech stocks such as Amazon, Google Alphabet, Microsoft, and Tesla also showed weakness.

[Image source=Reuters Yonhap News]

Investors are awaiting the employment report to be released the next day while closely monitoring Treasury yields and economic indicators. The ADP private employment data released the previous day fell short of expectations, raising attention to whether this trend will continue in the employment report. August nonfarm payrolls increased by 187,000, significantly below the 12-month average monthly figure of 271,000. Currently, Wall Street expects September nonfarm payrolls to increase by 160,000 to 170,000, showing a slowdown 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 a key factor.

The U.S. unemployment data released on the day fell short of expectations, reaffirming a stronger-than-expected labor market. According to the U.S. Department of Labor, initial jobless claims last week increased by 2,000 from the previous week to 207,000, below Wall Street's forecast of 210,000.

Economic media CNBC reported, "The weekly unemployment data disappointed some investors who hoped it would indicate cracks in the labor market," adding, "Investors do not want a recession but are hoping for labor market weakness that would make the Fed reconsider rate hikes and halt the rise in Treasury yields." Since the Fed has identified below-trend low growth and labor market slowdown as essential conditions for achieving its inflation target, if employment data continues to show stronger-than-expected performance, concerns about tightening are likely to increase.

Additionally, according to the Challenger, Gray & Christmas (CG&C) layoff report, planned layoffs in September totaled 47,457, a 37% decrease from the previous month but a 58% increase compared to a year ago. Scott Radner, Chief Investment Officer at Horizon Investments, evaluated, "Looking at the overall labor market data, it is clear that the situation is improving."

The market currently favors a rate hold in November. According to the FedWatch tool from the Chicago Mercantile Exchange (CME), as of the morning of this day, federal funds futures reflect over a 78% probability that the Fed will hold rates steady in November. The probability of a baby step (a 0.25% rate hike) stands at around 21%. There are two remaining FOMC meetings this year, in November and December.

In the New York bond market, the 10-year U.S. Treasury yield is steady around 4.73%. The previous day, the 10-year yield had surpassed 4.88%, marking a 16-year high, before retreating. The 30-year yield rose to 4.89%. The 2-year yield, which is sensitive to monetary policy, stands at 5.02%.

The dollar index, which measures the value of the U.S. dollar against six major currencies, declined to around 106.5. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's "fear gauge," rose over 4% to 19.3. International oil prices showed slight declines. November West Texas Intermediate (WTI) crude oil prices traded around $83 per barrel, down 0.5% from the previous close.

European stock markets showed mixed trends. Germany's DAX index traded slightly lower. The UK's FTSE index rose 0.7%, and France's CAC index increased by 0.09%.