[New York Stock Market] Rise on Employment Slowdown Signals and Falling Treasury Yields... Dow Up for 7 Consecutive Trading Days

US New Unemployment Claims Highest in 8 Months
Strong Treasury Auction Leads to Decline in Treasury Yields
Fed Daily: "It Will Take Time for Inflation to Slow"

The three major indices of the U.S. New York stock market all closed higher on the 9th (local time). The increase in new unemployment claims signaled a slowdown in the labor market, spreading expectations for an interest rate cut within the year and reviving investor sentiment. Treasury yields also fell, driving the index gains.

On that day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 39,387.76, up 331.37 points (0.85%) from the previous trading day. This marked the seventh consecutive day of gains and the longest winning streak this year. The large-cap S&P 500 index rose 26.41 points (0.51%) to 5,214.08, while the tech-heavy Nasdaq index gained 43.51 points (0.27%) to close at 16,346.26.

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

On that day, the U.S. Department of Labor announced that new unemployment claims for the week of April 28 to May 4 totaled 231,000, 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 consecutive 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. Investors interpreted this 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 showed 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 that day priced in a 67.9% probability that the Fed would cut interest rates by at least 0.25 percentage points at the September Federal Open Market Committee (FOMC) meeting, slightly up from 65.7% the previous day.

Philip Kolma, Global Strategist at MRB Partners, analyzed, "The data provides the Fed an opportunity to lean toward a dovish (monetary easing) bias," adding, "The market is taking the sharp rise in new unemployment claims announced today as a positive factor."

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," and added, "Investors may have adapted to the idea of waiting until September for a Fed rate cut, but waiting indefinitely won’t necessarily be comfortable."

The strong demand at the U.S. Treasury bond auction that day also helped lower Treasury yields, further boosting investor sentiment. The benchmark 10-year U.S. Treasury yield fell 3 basis points (1 bp = 0.01 percentage point) to 4.45%, while the 2-year Treasury yield, which is sensitive to monetary policy, declined 3 basis points to 4.81%.

Fed officials continued to speak that day. Mary Daly, President of the Federal Reserve Bank of San Francisco, stated that current interest rates are restraining the economy and that "it will take more time" to bring inflation back to the Fed’s target. This reaffirmed Fed Chair Jerome Powell’s message that it will take longer than expected to confirm a slowdown in inflation. The upcoming remarks from Fed Governor Michelle Bowman and Vice Chair for Supervision Michael Barr are also expected to be consistent with this stance.

Among individual stocks, U.S. regional wireless carrier US Cellular surged 27.67% on news that it is being discussed for a split sale to Verizon and T-Mobile, the top two U.S. wireless carriers. Verizon rose 0.79%, and T-Mobile gained 1.14%. Some companies fell due to weak earnings outlooks. British semiconductor company ARM dropped 2.34% after issuing a disappointing earnings forecast the previous day. Accommodation-sharing company Airbnb fell 6.87% following a strong first-quarter performance but a weak second-quarter outlook.

International oil prices rose. West Texas Intermediate (WTI) crude oil closed at $79.26 per barrel, up $0.27 from the previous day, while Brent crude, the global oil price benchmark, rose $0.30 to $83.88 per barrel.