[New York Stock Market] Rise on Powell's "Rate Cut Within the Year" Remarks... Nasdaq Up 0.58%

Powell Reaffirms Caution in US House
Market Reacts to No Additional Negative Factors
January Private Employment Growth Expands

The three major indices of the U.S. New York stock market all closed higher on the 6th (local time). While Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), reaffirmed his cautious stance on early interest rate cuts, the market focused on his remarks that a rate cut within the year would be appropriate. The market was relieved, saying "no news is good news," as no additional negative factors were confirmed.

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On that day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average, centered on blue-chip stocks, closed at 38,661.05, up 75.86 points (0.2%) from the previous trading day. The S&P 500, focused on large-cap stocks, rose 26.11 points (0.51%) to 5,104.76, and the Nasdaq index ended trading at 16,031.54, up 91.96 points (0.58%).

By stock, Apple, which had fallen the previous day due to weak iPhone sales in China, declined another 0.59% on this day. Tesla, also facing weak sales in China, fell 2.32% following the previous day's decline. New York Community Bancorp (NYCB), which is facing a crisis due to commercial real estate loan defaults, rose 8.07% after announcing a $1 billion (about 1.33 trillion won) capital expansion plan. U.S. security company CrowdStrike jumped 10.76% on strong earnings. U.S. big data company Palantir Technologies rose 9.87% on news of a supply contract with the U.S. military.

The market's greatest focus was on the message from Chairman Powell, who appeared at the semiannual monetary policy report to the House Financial Services Committee on that day.

Chairman Powell stated, "Rate cuts will not be guaranteed until we gain greater confidence that inflation is moving steadily toward the central bank's 2% target." He reiterated his cautious stance against early rate cuts. The reason for maintaining a cautious position on changing the direction of monetary policy was the robust U.S. economy.

Chairman Powell maintained the outlook for rate cuts this year. He said, "We see the policy rate as having peaked in this tightening cycle," and "If the economy broadly progresses gradually as expected, it would be appropriate to reverse policy restraint at some point this year."

The market paid attention to the fact that there were no additional negative factors in Powell's remarks.

Jose Torres, Senior Economist at Interactive Brokers, analyzed, "Although Chairman Powell did not promise rate cuts in the near future, his positive view on the inflation trajectory, along with confidence that the central bank's current rate has peaked, is sufficient for market participants."

David Russell, Global Chief Market Strategist at TradeStation, said, "Investors are still in a wait-and-see mode," and evaluated, "Powell's remarks contain neither new nor good news. He confirmed the market's preference for rate cuts while emphasizing the potential risks if cuts do not occur."

Indicators that provide insight into the U.S. labor market situation were also released. According to the February employment report released by U.S. private labor market research firm ADP on that day, private sector new job creation was 140,000, below the market expectation of 149,000. However, the increase was larger than January's 111,000, indicating the labor market remains robust. Wages for workers who have been at the same job for the past 12 months rose 5.1% year-over-year, the smallest increase since August 2021.

Nela Richardson, Chief Economist at ADP, evaluated, "The employment growth remains solid," adding, "Although wage growth has slowed, it still exceeds inflation." She further analyzed, "The labor market is dynamic but not at a level to change the Fed's rate decisions this year."

The U.S. Department of Labor also released the January Job Openings and Labor Turnover Survey (JOLTS) report on that day. The number of job openings, which shows demand in the U.S. labor market, was 8.86 million in January. This was lower than the previous month (8.889 million) but exceeded market expectations (8.8 million). U.S. job openings have been declining since peaking at 12 million in March 2022.

To more accurately assess the labor market situation, the February employment report to be released by the U.S. Department of Labor on the 8th should be examined.

Government bond yields showed mixed movements within a narrow range. The U.S. 10-year Treasury yield, a global bond yield benchmark, slightly declined to 4.11%, while the 2-year Treasury yield, sensitive to monetary policy, fluctuated slightly higher around 4.56%.

International oil prices rose on expectations of increased U.S. crude oil demand and Powell's remarks anticipating rate cuts within the year. West Texas Intermediate (WTI) crude rose $0.98 to $79.13 per barrel, and Brent crude increased $0.92 to $82.96 per barrel.