[New York Stock Market] Employment Report Awaited Despite Private Employment Slowdown... Closes Slightly Lower

The three major indices of the U.S. New York stock market closed slightly lower on the 6th (local time), despite private employment data falling short of expectations, as investors awaited the employment report to be released later in the week.

At the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 36,054.43, down 70.13 points (0.19%) from the previous session. The S&P 500 index, centered on large-cap stocks, fell 17.84 points (0.39%) to 4,549.34, while the tech-heavy Nasdaq index dropped 83.20 points (0.58%) to 14,146.71.

Among the S&P 500 sectors, all eight sectors except utilities, industrials, and healthcare declined. The energy sector saw losses as international oil prices continued to fall. By individual stocks, NVIDIA fell more than 2% despite CEO Jensen Huang's remarks about developing semiconductor chips for export to China. Apple, which surpassed a market capitalization of $3 trillion the previous day, showed a slight decline. Alphabet, Google's parent company, also slipped slightly despite the announcement of 'Gemini,' an AI language model surpassing GPT-4. Cloud company Box dropped more than 10% due to earnings below Wall Street expectations. In contrast, Toll Brothers rose nearly 2% on better-than-expected earnings, and Campbell Soup also gained over 7% on earnings optimism.

[Image source=Reuters Yonhap News]

Investors closely monitored the labor market data released daily ahead of the Department of Labor's nonfarm payroll report scheduled for later in the week, as well as movements in Treasury yields. The ADP employment report released that day showed additional signs of slowdown, which initially supported gains early in the session. However, cautious views that the market should wait for the employment report on the 8th gained traction, leading to a return to a downtrend. Craig Erlam, senior market analyst at OANDA, said, "It is undeniable that the data later in the week is the data everyone is eagerly awaiting."

According to the ADP employment report, U.S. private employment increased by 103,000 in November compared to the previous month, falling short of Wall Street's forecast of 128,000. Private employment remained in the 100,000 range for two consecutive months, reinforcing the analysis that accumulated tightening is cooling the labor market. Earlier, the October job postings data 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, also slowed. Year-over-year wage growth was 5.6%, the lowest level since October 2021. Economic media CNBC reported, "The 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 current figures point toward a soft landing, if the hawkish policy stance continues, investors may begin to worry about a recession."

Investors are expected to watch the upcoming indicators this week to gain hints about the Fed's future monetary policy direction and market movements. The following day will see weekly jobless claims data, and on the 8th, the Department of Labor's November nonfarm payroll report will be released. Wall Street estimates that nonfarm employment will increase by 190,000 in November.

Currently, the market has largely priced in a rate hold at the December Federal Open Market Committee (FOMC) meeting next week. According to the CME FedWatch tool, federal funds futures on that day reflected over a 97% probability that the Fed will hold rates steady this month. The probability of maintaining the hold through January next year exceeds 85%. The chance of a rate cut beginning in January is priced at 12%. The likelihood of a rate cut of 0.25 percentage points or more in March or May next year exceeds 60% and 85%, respectively.

However, Wall Street firms such as Goldman Sachs and BlackRock continue to caution 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." A survey released that day by a foreign news agency showed that half of economic experts expect the Fed to hold rates at least until July next year and that any rate cuts would be aimed at adjusting real interest rates.

The U.S. trade deficit for October increased due to a decline in exports. According to the Commerce Department, the trade deficit widened by $3.1 billion (5.1%) from the previous month to $64.3 billion.

In the New York bond market, the 10-year U.S. Treasury yield fell to around 4.11%. The 2-year yield, sensitive to monetary policy, rose slightly to about 4.59%. The dollar index, which measures the value of the dollar against six major currencies, rose more than 0.1% to 104.1. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's fear gauge, moved up 0.54% to 12.92.

International oil prices fell for the fifth consecutive trading day amid concerns over a global economic slowdown and reduced demand. On the New York Mercantile Exchange (NYMEX), January delivery West Texas Intermediate (WTI) crude oil closed at $69.38 per barrel, down $2.94 (4.07%) from the previous day.