[New York Stock Market] S&P 500 and Nasdaq Reach Record Highs Amid Slowing Employment Data... Nvidia Surges Over 5%

ADP May Private Sector New Jobs 152,000
Below Market Expectations... Rising Hopes for Interest Rate Cuts
Focus on May Employment Report from Labor Department on 7th

The three major indices of the U.S. New York stock market all closed higher on the 5th (local time). Investor sentiment revived as expectations for interest rate cuts spread due to recent continued weak employment data. AI leader Nvidia surged more than 5%, leading the tech stock rally.

On that day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 38,807.33, up 96.04 points (0.25%) from the previous trading day. The large-cap-focused S&P 500 index rose 62.69 points (1.18%) to 5,354.03, and the tech-heavy Nasdaq index gained 330.86 points (1.96%) to close at 17,187.9, all reaching record highs based on closing prices.

By stock, Nvidia, which recently unveiled the next-generation AI graphics processing unit (GPU) 'Rubin,' surged 5.16% to hit an all-time high. Its market capitalization surpassed $3 trillion. Bank of America (BoA) predicts that Nvidia will rise an additional 22% from that day's closing price, surpassing $1,500 per share. Other tech stocks also rose. Meta, Facebook's parent company, increased 3.79%, while Microsoft (MS) and Alphabet, Google's parent company, rose 1.91% and 1.11%, respectively. Hewlett Packard Enterprise surged 10.68% after its fiscal second-quarter revenue exceeded market expectations. CrowdStrike also soared 11.98% following better-than-expected earnings and future outlook.

Investors focused on employment data that day. According to the U.S. private labor market research firm ADP's employment report, private sector new job creation in May was 152,000. This was significantly below the market expectation of 173,000 and also well below April's private new employment of 188,000. Following the previous day's report of a decline in job openings in April, this marked two consecutive days of confirmed cooling signals in the labor market.

Earlier, according to the Job Openings and Labor Turnover Survey (JOLTS) released by the U.S. Department of Labor the day before, the number of job openings in April was 8.059 million, the lowest in over three years since February 2021. This figure was significantly below both the market expectation (8.37 million) and the previous month's figure (8.355 million). The hiring rate was 3.6%, and the voluntary quit rate was 2.2%, both slightly up from the previous month (3.5% and 2.1%, respectively).

The market views that as the labor market, which was a cause of inflation overheating, cools down, the U.S. Federal Reserve (Fed) is accumulating grounds to cut the benchmark interest rate. Investors betting on rate cuts are also increasing. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on that day reflected more than a 70% chance that the Fed will cut rates by at least 0.25 percentage points at the Federal Open Market Committee (FOMC) meeting in September. This is up from 67% the day before and 47% a week ago.

Solita Marcelli, Chief Investment Officer (CIO) of UBS Global Wealth Management, said, "With Fed rate cuts, solid earnings growth, and the growth trend brought by AI, the S&P 500 index is expected to reach 5,500 by the end of the year," adding, "The Fed will support the stock market by cutting rates twice this year."

Now, investors' attention is focused on the Department of Labor's May nonfarm payroll report, considered the most important indicator this week. The May nonfarm new employment, to be released on the 7th, is expected to increase by 185,000 compared to the previous month. In April, it rose by 175,000, falling short of the expected 243,000. If the overheated labor market calms down, consumption slowdown and inflation decline could accelerate.

Government bond yields were slightly down. Both the U.S. 10-year Treasury yield, a global bond yield benchmark, and the 2-year Treasury yield, sensitive to monetary policy, fell slightly from the previous trading day, trading around 4.27% and 4.72%, respectively.

International oil prices rose as concerns about demand slowdown eased amid expectations of Fed rate cuts. West Texas Intermediate (WTI) crude oil closed at $74.07 per barrel, down $0.82 (1.1%) from the previous trading day, and Brent crude, the global oil price benchmark, closed at $78.41, down $0.89 (1.2%).