[New York Stock Market] Strong Employment Delays Interest Rate Cut Expectations... Dow Closes Down 0.2%

The New York stock market declined across all three major indices following strong May nonfarm payroll data. Investor sentiment, which had been buoyed by expectations of interest rate cuts from the European Central Bank (ECB) and the U.S. Federal Reserve (Fed), weakened.

On the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 38,798.99 on the 7th (local time), down 87.18 points (0.22%) from the previous session.

The Standard & Poor's (S&P) 500 index fell 5.97 points (0.11%) to 5,346.99, and the Nasdaq index dropped 39.99 points (0.23%) to 17,133.13. The S&P 500 briefly hit a record high of 5,375.08 early in the session but then declined. The Nasdaq had set an all-time high earlier this week but fell for the second consecutive trading day.

Market participants focused on the May nonfarm payroll report and the Fed's interest rate cut trajectory. The U.S. Department of Labor announced that nonfarm payrolls increased by 272,000 in May, exceeding the Wall Street Journal (WSJ) consensus estimate of 190,000.

The unemployment rate for May was 4.0%, unchanged from the previous month but above the market expectation of 3.9%.

Despite the rise in unemployment, the still-robust employment data is seen as weakening the case for the Fed to ease monetary policy this year. In particular, expectations for Fed rate cuts, which had been buoyed by the ECB's recent rate cut, turned to disappointment.

The 10-year U.S. Treasury yield rose sharply by more than 14 basis points from the previous electronic close to around 4.43%, contributing to the decline in investor sentiment. According to the CME Group's FedWatch Tool, the probability of a 25 basis point Fed rate cut in September fell to 45.0%, down from above 50% previously. The probability of holding rates steady in September rose to 51.0%.

Consequently, JPMorgan Chase and Citi, which had not ruled out a July Fed rate cut, revised their expected timing to November and September, respectively, after reviewing the nonfarm payroll data.

Among individual stocks, only Apple among the large tech 'M7' stocks rose by over 1%, following news that Apple will unveil a new artificial intelligence (AI) system called 'Apple Intelligence' next week. Nvidia, Meta Platforms (Facebook), Microsoft, Amazon.com, Tesla, and Alphabet A all declined.

By sector indices, financials, healthcare, industrials, and technology sectors rose, while energy, materials, real estate, and communication sectors fell.

[Image source=Yonhap News]