[New York Stock Market] Gains Reversed Amid High-Price Concerns... Awaiting Powell's Remarks and Employment Data

After Last Week's Rally, 'Taking a Breather'
Bitcoin Surges Past $66,000, Related Stocks Soar
Focus on Powell's Congressional Appearance on 6-7
February Employment Report on 8 Also in Spotlight

The three major indices of the U.S. New York stock market closed lower on the 4th (local time) amid concerns over high valuations. After last week’s rally, during which the S&P 500 and Nasdaq indices hit record highs, the New York stock market is now taking a breather, awaiting messages from Jerome Powell, Chair of the U.S. Federal Reserve (Fed), and upcoming employment data this week.

On this day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 38,989.83, down 97.55 points (0.25%) from the previous session. The large-cap S&P 500 index fell 6.13 points (0.12%) to 5,130.95, and the Nasdaq index dropped 67.43 points (0.41%) to 16,207.51.

By individual stocks, Nvidia rose 3.6%. Super Micro Computer and Deckers Outdoor gained 18.65% and 2.58%, respectively, following news of their inclusion in the S&P 500 this month. Apple fell 2.54% after the European Union (EU) Commission fined Apple 1.84 billion euros (approximately 2.66 trillion KRW) for antitrust violations related to its music streaming service. Tesla dropped 7.16% after announcing price cuts and subsidy policies over the past weekend. JetBlue surged 4.33% following news of the suspension of its merger plans with Spirit Airlines, which fell 10.84%. Bitcoin surpassed $66,000 intraday, boosting related stocks: Coinbase surged 11.36%, and MicroStrategy jumped 23.59%.

The New York stock market has rallied over the past few weeks on growing expectations for artificial intelligence (AI). The Nasdaq index closed at 16,279.94 on the previous trading day, March 1, setting a new all-time high both intraday and at the close. The S&P 500 also closed at 5,137.08, surpassing the 5,100 level for the first time. However, amid concerns over high valuations, investors took profits, giving back some of the gains.

Matt Maley of asset management firm Miller Tabak said, "We are seeing various risk assets break at astonishing levels," diagnosing that "some of this is a sign of a bubble." He added, "This means the risk in the stock market is increasing," warning investors "not to become complacent."

[Image source=Yonhap News]

Market attention is now focused on Chair Powell’s remarks and employment data. Powell is scheduled to appear before the U.S. Congress’s House and Senate on the 6th and 7th for the semiannual monetary policy report. He is expected to discuss the overall state of the U.S. economy, the fight against inflation, and his views on the timing of interest rate cuts. The market will likely seek hints about the Fed’s future interest rate path from these remarks. Powell is expected to reaffirm his stance against rushing rate cuts, emphasizing the need for additional evidence of inflation easing.

Ahead of Powell’s scheduled remarks this week, Raphael Bostic, President of the Federal Reserve Bank of Atlanta, reiterated a cautious stance on rate cuts. Through the Fed’s website, Bostic predicted that the Fed would cut rates for the first time in the third quarter of this year and then pause further cuts. He said, "I do not expect consecutive cuts," adding, "Given the uncertainty, it is better to act first and then observe the reactions of market participants such as businesses and households." He forecasted that the total rate cut by the end of this year would amount to 0.5 percentage points over two occasions.

Additionally, investors are closely watching employment data that could influence Fed monetary policy. The U.S. Department of Labor will release the February employment report on the 8th. The market expects nonfarm payrolls to increase by 200,000 in February, a significant drop from January’s 353,000. Since January’s nonfarm payrolls exceeded the forecast of 185,000 by more than double, confirming an overheated labor market, attention is on whether the February report will show signs of labor market cooling. The unemployment rate for February is expected to remain steady at 3.7%, the same as January.

The U.S. Department of Labor’s January Job Openings and Labor Turnover Survey (JOLTS) and the private employment data provider ADP’s February nonfarm payroll figures will also be released on the 6th. Job openings in U.S. companies are expected to have declined from 9.026 million in December last year to 8.895 million in January this year.

Chris Larkin, Managing Director at Morgan Stanley E-Trade, said, "For the S&P 500 to set a record high for the eighth consecutive week, Powell will need to offer encouraging remarks about rate cuts during the two-day congressional report," adding, "Surprisingly strong employment data should be avoided."

U.S. Treasury yields are on the rise. The benchmark 10-year U.S. Treasury yield increased by 4 basis points (1 bp = 0.01 percentage points) to 4.22%, while the 2-year Treasury yield, sensitive to monetary policy, rose 7 basis points, trading around 4.6%.

International oil prices rose on news that the Organization of the Petroleum Exporting Countries Plus (OPEC+) extended production cuts but then fell again after hitting the $80 per barrel resistance level. West Texas Intermediate (WTI) crude fell 1.55% to $78.73 per barrel, and Brent crude dropped 0.87% to $82.82 per barrel.