The three major indices of the U.S. New York stock market showed a unified upward trend in early trading on the 6th (local time) as they absorbed private employment data that fell short of expectations.
At around 10:27 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average was moving at the 36,212 level, up 0.24% from the previous close. The S&P 500 index, centered on large-cap stocks, was up 0.14% at 4,573, and the tech-heavy Nasdaq index was up 0.01% at 14,231.
Currently, eight sectors excluding technology, energy, and consumer staples within the S&P 500 are all rising. Nvidia is trading slightly lower following comments from CEO Jensen Huang about developing semiconductor chips for export to China. Apple, which surpassed a market capitalization of $3 trillion the previous day, is also moving slightly lower. Cloud company Box fell about 9% due to earnings that missed Wall Street expectations. On the other hand, Toll Brothers rose more than 3% on earnings that exceeded market expectations. Chinese-related stocks such as Alibaba, Tencent, and JD.com, which showed weakness the previous day due to Moody’s downgrade of the country’s credit rating outlook, are rebounding today as S&P and Fitch maintain a 'stable' outlook respectively.
Investors are digesting the employment data released daily and the resulting movements in Treasury yields ahead of the Labor Department’s nonfarm payroll report scheduled for later in the week. According to the ADP employment report released on the day, U.S. private employment in November increased by 103,000 from the previous month, falling short of the Wall Street forecast of 128,000. Private employment has remained in the 100,000 range for two consecutive months, reinforcing the analysis that accumulated tightening is leading to a cooling labor market. Earlier, the October job postings released the previous day also fell to the lowest level in over two and a half years, confirming signs of labor market cooling.
Additionally, the ADP report confirmed that wage growth, which had been a factor fueling inflation, has also slowed, sending a positive signal to the market. Year-over-year wage growth was 5.6%, the lowest level since October 2021. Economic media CNBC reported, "A decrease in labor costs is a positive signal for the inflation trajectory," adding, "It is the latest sign that the labor market, long considered a problem for the Federal Reserve (Fed), is easing." David Russell, Global Market Strategist at TradeStation, said, "This shows that the Fed’s inflation control is now translating into results," but also cautioned, "While the current figures point toward a soft landing, if the hawkish policy stance continues, investors may begin to worry about a recession."
The following day, weekly unemployment claims will be released, and on the 8th, the Labor Department’s November nonfarm payroll report is scheduled to be published. If signs of easing are reconfirmed in the labor market following inflation, it could further strengthen expectations for a rate freeze in December and rate cuts next year. Wall Street estimates that nonfarm employment will increase by 190,000 in November.
Currently, the market has largely priced in a rate freeze at the December Federal Open Market Committee (FOMC) meeting next week. According to the CME’s FedWatch tool, federal funds futures markets reflect over a 97% probability that the Fed will hold rates steady this month. The probability that the freeze will continue through January next year exceeds 85%. Expectations for a rate cut starting in January 2025 are priced in at 12%. The chances of a rate cut of 0.25 percentage points or more in March or May next year exceed 60% and 85%, respectively. However, caution remains among Wall Street firms such as Goldman Sachs and BlackRock, warning that market expectations for rate cuts may be excessive. Wei Li, a strategist at BlackRock, said the previous day, "There is a risk that these hopes could lead to disappointment," adding, "Higher rates and greater volatility are becoming the new norm."
In the New York bond market, the 10-year U.S. Treasury yield slightly declined to around 4.12%. The 2-year yield, which is sensitive to monetary policy, is moving around 4.59%. The Dollar Index, which measures the value of the dollar against six major currencies, fell more than 0.1% to 103.8 compared to the previous close.
The U.S. trade deficit for October, released on the day, increased due to a decline in exports. According to the Commerce Department, the trade deficit was $64.3 billion, up $3.1 billion (5.1%) from the previous month.
European stock markets are on the rise. Germany’s DAX index rose 0.97%. The UK’s FTSE index increased 0.65%, and France’s CAC index rose 0.87%.
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