[New York Stock Market] Mixed Close... Fed's 'Cautious Stance' Supports Strong Employment Data

The three major indices of the U.S. New York stock market closed mixed on the 3rd (local time). Federal Reserve (Fed) officials expressed caution regarding interest rate cuts. A strong private employment report released ahead of the March nonfarm payroll data influenced investor sentiment.

On the day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 39,127.14, down 43.1 points (0.11%) from the previous trading day. The large-cap S&P 500 index ended trading at 5,211.49, up 5.68 points (0.11%). The tech-heavy Nasdaq index closed at 16,277.46, rising 37.01 points (0.23%).

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Technology stocks showed mixed trends. Nvidia initially rose but then turned downward, falling 0.55%. Intel dropped 8.22% after news that it recorded an operating loss of $7 billion in its foundry (semiconductor contract manufacturing) business last year. Despite news of an earthquake in Taiwan, shares of TSMC, the world's largest foundry company, rose 1.27%.

Meta Platforms rose 1.88%, and Netflix increased by 2.58%.

By sector, indices related to consumer discretionary, energy, industrials, materials, real estate, technology, and telecommunications rose. Consumer staples, financials, health care, and utilities declined.

Ma Young-yu, Chief Investment Officer (CIO) at BMO Wealth Management, said, "The invincible stock market over the past five months was an exception, not the norm," adding, "The Goldilocks narrative of high growth and declining inflation may reappear within a few months. However, it is also possible to see a more unstable market that digests recent gains and takes time for fundamentals to catch up with valuations."

Stronger-than-expected solid employment data influenced investor sentiment. According to the Automatic Data Processing (ADP) report released that day, private sector employment growth in the U.S. for March was the largest since July last year. Private sector new job creation in March was 184,000, a significant increase from 140,000 in February. This also greatly exceeded Wall Street's forecast of 148,000. Annual wages rose 5.1% compared to the same period last year.

A strong labor market lowers the likelihood of interest rate cuts. The ADP report serves as a preview of the U.S. Labor Department's employment report due on the 5th, although there can be significant differences in figures. Earlier, the February Personal Consumption Expenditures (PCE) inflation data did not deviate from market expectations, and the manufacturing sector showed unexpected expansion.

The Institute for Supply Management (ISM) reported that the March services Purchasing Managers' Index (PMI) stood at 51.4, about 1.2% lower than February's 52.6.

Comments from the Federal Reserve also dampened market expectations for rate cuts. Raphael Bostic, President of the Federal Reserve Bank of Atlanta, said in an interview with CNBC that due to slower-than-expected inflation easing, there would be only one rate cut in the fourth quarter this year.

Fed Chair Jerome Powell stated, "It is not expected to be appropriate to lower the benchmark interest rate until there is greater confidence that inflation is consistently moving toward 2%," adding, "Considering the economic situation and inflation progress, there is time to use incoming data as guidance for policy decisions." This aligns with remarks made during the press conference following the Federal Open Market Committee (FOMC) meeting on the 20th of last month.

In the New York bond market, Treasury yields are falling. The 10-year Treasury yield is at 4.349%, while the 2-year Treasury yield, sensitive to monetary policy, is around 4.672%.

International oil prices rose due to worsening Middle East tensions. Brent crude closed at $89.35 per barrel, up 43 cents (0.5%) from the previous trading day. During the session, it briefly rose to $89.99 per barrel, nearing the $90 mark. West Texas Intermediate (WTI) crude closed at $85.43 per barrel, up 28 cents (0.3%). Both futures prices recorded gains, reaching their highest levels in five months since October 27 last year.