Last Week's New Unemployment Claims Highest in Two Months
Apple, Amazon, Meta Earnings Announced After Market Close
The three major indices of the U.S. New York stock market showed an upward trend in the early trading session on February 1 (local time), the first day of the month. This was a rebound buying flow following the previous day's decline after Federal Reserve (Fed) Chair Jerome Powell dismissed speculation of a rate cut in March. Market sentiment improved as additional indicators confirmed a slowdown in the labor market. The market is awaiting the earnings reports of Apple, Amazon, and Meta, which will be released after the market closes that day.
As of 9:58 a.m. at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average was trading at 38,184.72, up 0.09% from the previous trading day. The S&P 500, which focuses on large-cap stocks, rose 0.36% to 4,863.28, and the tech-heavy Nasdaq index increased 0.61% to 15,256.19.
Qualcomm is down more than 4% despite surpassing market expectations with strong smartphone chip sales in the first quarter of fiscal year 2024, achieving higher revenue and net income. Disappointment over future earnings prospects was reflected as trading firms reported reducing orders due to increased inventory. Solar company NextTracker jumped more than 15% after raising its earnings guidance. Global pharmaceutical company Merck also rose over 2% following earnings that exceeded expectations.
The previous day, the New York stock market fell sharply after the first Federal Open Market Committee (FOMC) regular meeting of the year, as the Fed kept the benchmark interest rate steady at 5.25-5.5% for the fourth consecutive time, dismissing expectations of a rate cut in March. Chair Powell stated that more confidence is needed that inflation is slowing to the target of 2%. As a result, the Dow Jones Industrial Average fell 0.82%, the large-cap-focused S&P 500 dropped 1.61%, and the tech-heavy Nasdaq index plunged 2.23%. The Nasdaq index, which fell the most, experienced its largest decline since October last year.
SoFi investment strategist Liz Young analyzed, "What he (Powell) told us is, 'You haven’t been listening all along.' He has been quite clear from the start of the rate hike cycle that it is better to keep rates too high for too long than to cut too soon." She added, "He has not changed his stance. The market tried to push him to change his position, but he insists on making his own decisions."
Since the January FOMC, the market's timing for a rate cut has shifted from March to May. According to the Chicago Mercantile Exchange (CME) FedWatch, the current interest rate futures market reflects more than a 60% chance that the Fed will cut rates by 0.25 percentage points at the May FOMC, up from the previous day's 46%. Conversely, the probability of a rate cut in March has fallen to the 37% range from 52% the day before.
Meanwhile, a labor market slowdown indicator was released that morning. The U.S. Department of Labor reported that initial jobless claims for the previous week increased by 9,000 to 224,000, the highest level in over two months since the week of November 5-11 last year (233,000). This exceeded expert expectations of 213,000 by 11,000. Continuing claims, which count those filing for unemployment benefits for at least two weeks, rose by 70,000 to 1,898,000 in the week of January 14-20, surpassing the market forecast of 1,840,000. This indicates fewer previously unemployed people found new jobs. The four-week moving average of initial jobless claims, which provides a clearer trend, increased by 5,250 to 207,750 compared to the previous week.
Pawad Rajakzada, an analyst at Citi Index and Forex.com, said, "Attention will be focused on U.S. job data. Traders are still holding on to the possibility of a faster-than-expected rate cut, and if incoming data shows a downward trend, these expectations will grow even stronger."
The market is paying close attention to the earnings announcements of big tech companies. Apple, Amazon, and Meta will release their earnings reports shortly after the market closes that day. If these companies report earnings surprises, it is expected to provide a rebound momentum for the U.S. stock market, which fell sharply after Chair Powell dismissed the March rate cut speculation.
International oil prices are rising. West Texas Intermediate (WTI) crude oil is up about 1.3%, and Brent crude is up about 0.8%.
In the New York bond market, the yield on the U.S. 10-year Treasury note, a global benchmark for bond yields, fell to around 3.87%. This decline in yields reflects eased concerns about a 'supply bomb' as the U.S. Treasury announced it will not increase bond issuance over the next few quarters. The yield on the 2-year Treasury note, which is sensitive to monetary policy, stands at around 4.2%.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
