New York Stock Market Turns Up on Signs of Cooling Employment

US Initial Unemployment Claims 231,000
Highest in 8 Months... Exceeding Expert Expectations

The three major indices of the U.S. New York stock market showed an upward trend in the early trading hours on the 9th (local time). Last week, an increase in new unemployment claims signaled a slowdown in the labor market, raising expectations for an interest rate cut within the year. However, the gains were limited due to some companies reporting weaker-than-expected earnings.

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As of 10:39 a.m. at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average was up 0.54% from the previous close, standing at 39,269.17. The S&P 500, which focuses on large-cap stocks, rose 0.31% to 5,203.98, while the tech-heavy Nasdaq index increased 0.16% to 16,328.75.

The stock market, which had fallen earlier due to weak corporate earnings, turned upward after the release of employment data.

On this day, the U.S. Department of Labor reported that new unemployment claims for the week of April 28 to May 4 totaled 231,000, marking the highest level in eight months since August last year. This figure significantly exceeded Bloomberg experts’ forecast of 212,000 and rose sharply compared to the revised 209,000 claims from the previous week. Continuing claims, which represent those filing for unemployment benefits for at least two weeks, were recorded at 1,785,000 for the week of April 21 to 27, an increase of 17,000 from the prior week.

The U.S. Federal Reserve (Fed) is closely monitoring related indicators, viewing an overheated labor market as a potential driver of inflation. The data was interpreted as a signal that the previously overheated U.S. labor market may be gradually cooling, fueling expectations for an interest rate cut at some point this year. Earlier, the April employment report released by the U.S. Department of Labor on May 3 also indicated signs of labor market slowdown. According to the report, nonfarm payrolls increased by 175,000, falling well short of the Dow Jones consensus forecast of 240,000. The unemployment rate rose 0.1 percentage points to 3.9%, and the weekly wage growth slowed to 0.2% month-over-month.

According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market on this day priced in a 67.9% probability that the Fed will cut interest rates by at least 0.25 percentage points at the Federal Open Market Committee (FOMC) meeting in September. This was a slight increase from 65.7% the previous day.

The yield on the U.S. 2-year Treasury note, sensitive to monetary policy, moved down 2 basis points (1 bp = 0.01 percentage points) to around 4.82% compared to the previous trading day. The yield on the benchmark 10-year U.S. Treasury note remained steady at about 4.49%, similar to the previous day.

Chris Larkin, Director of Trading and Investment at Morgan Stanley E*TRADE, said, "Only time will tell whether this is a one-off or part of a genuine cooling in the labor market. Investors may have adapted to the idea of waiting until September for a Fed rate cut, but waiting indefinitely may not be comfortable."

Fed officials’ remarks continue on this day. Mary Daly, President of the Federal Reserve Bank of San Francisco, is scheduled to speak. The following day, Fed Governor Michelle Bowman and Vice Chair for Supervision Michael Barr are expected to deliver speeches. Investors are focusing on messages from Fed officials that may provide hints about the future path of interest rates.

By individual stocks, British semiconductor company ARM is down 1.81% following a disappointing earnings outlook announced the previous day. Airbnb, a lodging-sharing company, is down 6.25% after issuing a weak second-quarter earnings forecast despite strong first-quarter results. HubSpot, a marketing software company, is up 1.59% amid renewed reports that Alphabet, Google's parent company, is negotiating to acquire it. Alphabet itself is down 0.4%.

International oil prices are rising. West Texas Intermediate (WTI) crude oil is trading at $79.52 per barrel, up $0.53 (0.67%) from the previous day, while Brent crude, the global oil price benchmark, is up $0.41 (0.49%) to $83.99 per barrel.