New York Stock Market Falls on Powell's Remarks and Surprise Employment Data... Fed Officials' Statements in Focus

Chairman Powell Emphasizes 'Cautious Approach' to Interest Rate Cuts
Interest Rate Cut Outlook Delayed...Government Bond Yields Rise

The three major indices of the U.S. New York stock market showed a downward trend in the early trading hours on the 5th (local time). Investors are adopting a wait-and-see stance after digesting Federal Reserve (Fed) Chair Jerome Powell's remarks emphasizing a "cautious approach" regarding the timing of interest rate cuts. The January jobs report showed a much larger increase than expected, pushing back expectations for the timing of rate cuts.

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As of 9:32 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average was trading at 38,493.36, down 0.42% from the previous trading day. The S&P 500, which focuses on large-cap stocks, fell 0.21% to 4,948.3, and the tech-heavy Nasdaq index was down 0.02% at 15,626.07.

Global cosmetics company Est?e Lauder surged more than 16% after announcing plans to cut 3-5% of its workforce and raising its earnings outlook. Construction machinery manufacturer Caterpillar rose more than 5% following earnings that exceeded market expectations. Nvidia jumped over 4% after investment bank Goldman Sachs raised its target price to $800. Snap, which operates the social networking service Snapchat, announced it would cut 529 employees, or 10% of its global workforce, and its stock fell nearly 1%. The company had previously cut 20% of its workforce in 2022 as part of restructuring. McDonald's shares fell 2% as overall sales fell short of market expectations due to decreased sales in the Middle East.

On the 2nd, the New York stock market closed higher with Meta's stock soaring more than 20% after reporting "surprise earnings." The Dow Jones Industrial Average rose 0.35%, and the S&P 500 jumped 1.07%, both reaching all-time highs. On the following trading day, the market declined as it digested Chair Powell's remarks.

Chair Powell appeared on CBS in the U.S. the previous day and said, "We want to see more evidence that inflation is steadily falling to 2%," adding, "Our confidence is increasing. We just want more confidence before taking the very important step of starting rate cuts." These remarks are seen as reaffirming the stance he expressed at the Federal Open Market Committee (FOMC) meeting on the 31st of last month. At that time, Powell said, "I think it is unlikely we will reach a level of confidence to be sure about the timing of rate cuts by the March meeting."

U.S. employment data has been mixed. The U.S. Department of Labor reported on the 2nd that nonfarm payrolls increased by 353,000 in January compared to the previous month. This was the largest increase in a year since January last year (482,000) and double the expert forecast of 185,000.

Due to the strong employment data, expectations for a rate cut in March have receded. According to the CME FedWatch tool, the current interest rate futures market reflects about a 15% chance that the Fed will cut rates by 0.25 percentage points at the March FOMC meeting, down from 20% the previous day.

James Lusciter, TD Securities' Global Macro Strategy Chief, said, "There is still a lot of uncertainty about how quickly they (the Fed) will cut rates," adding, "This week is a quiet week for data releases, so we plan to watch the central bank very closely."

The market is closely monitoring remarks from Fed officials this week for clues on monetary policy direction. Chicago Fed President Austan Goolsbee appeared on Bloomberg TV on the day, and Cleveland Fed President Loretta Mester and Minneapolis Fed President Neel Kashkari are scheduled to speak on the 6th.

In the New York bond market, the U.S. 10-year Treasury yield, a global benchmark for bond yields, rose to around 4.12%. The 2-year Treasury yield, which is sensitive to monetary policy, also rose to about 4.43%.

International oil prices are declining. Expectations for rate cuts have been pushed back, offsetting concerns about rising oil prices due to escalating tensions in the Middle East. West Texas Intermediate (WTI) crude oil fell $0.76 (1%) to $71.52 per barrel, and Brent crude dropped $0.65 (0.8%) to $76.68 per barrel.