New York Stock Market Rises Amid Slowing Employment Data... Treasury Yields Decline

US Continued Unemployment Claims Reach Highest in 31 Months
Q1 GDP Finalized at 1.4%, Up 0.1%P
May PCE Inflation to Be Announced on 28th

The three major indices of the U.S. New York stock market showed a slight upward trend in early trading on the 27th (local time). With mixed corporate earnings and signs of a slowing labor market, the indices are rising slightly. Investors' attention is focused on the Personal Consumption Expenditures (PCE) price index to be released on the 28th.

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As of 9:42 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average was trading at 39,165.89, up 0.1% from the previous close. The S&P 500, centered on large-cap stocks, rose 0.16% to 5,486.55, and the Nasdaq, focused on tech stocks, was up 0.27% at 17,853.84.

By individual stocks, U.S. semiconductor company Micron fell 4.38%. The selling continued after it released its fiscal fourth-quarter revenue forecast in line with market expectations. Levi's dropped 17.06% following disappointing quarterly earnings. Although 31 major U.S. banks passed the Federal Reserve's stress tests assuming a recession scenario, Goldman Sachs declined 2.15%. JPMorgan Chase rose 0.22%. Amazon, which surpassed a market capitalization of $2 trillion for the first time ever the previous day, was up 0.58%.

The U.S. Department of Commerce announced that the final GDP figure for the first quarter recorded an annualized growth rate of 1.4% compared to the previous quarter. This was an upward revision of 0.1 percentage points from the preliminary figure of 1.3% released last month.

Signs of a slowdown appeared in the labor market. According to the U.S. Department of Labor, the number of continuing unemployment claims, filed by those claiming unemployment benefits for at least two weeks, was 1,839,000 for the week of June 9?15. This was an increase of 18,000 from the previous week's revised figure of 1,821,000 and the highest since November 2021. Initial unemployment claims for the week of June 16?22 were 233,000, slightly below the expert forecast of 236,000. The increase in continuing claims is interpreted as a signal that the labor market is slowing down.

Jeff Roach, Chief Economist at LPL Financial, said, "The slight increase in continuing unemployment claims, reaching the highest level since late 2021, is sending a warning signal that the labor market may be slowing down," adding, "Both consumer and business activities are expected to slow in the second half of 2024, providing the Fed with ample opportunity to start cutting interest rates in the latter half of this year."

Market attention is focused on the May PCE price index to be released the next day. With both the consumer price index (CPI) and producer price index (PPI) inflation rates easing last month, the PCE inflation is also expected to slow. The market expects the May core PCE price index to rise 0.1% month-over-month and 2.6% year-over-year, both below the previous month's figures of 0.2% and 2.8%, respectively. If the Fed's closely watched PCE inflation slowdown is confirmed, it will add another basis for interest rate cuts and likely drive stock market gains.

The market is pricing in one to two interest rate cuts within the year. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on the day reflected a 64.1% probability that the Fed will cut rates by at least 0.25 percentage points at the September FOMC meeting. The probability of a 0.25 percentage point or more cut in November is 76.7%.

Brian Levitt, Global Market Strategist at Invesco, said, "We are currently in an environment somewhat synchronized with the Fed," adding, "What you need is the inflation story behind us, the Fed able to cut rates, and greater expectations in the market that a soft landing will occur."

U.S. Treasury yields are declining. The 10-year U.S. Treasury yield, a global benchmark for bond yields, fell 2 basis points (1 bp = 0.01 percentage points) from the previous trading day to 4.29%, while the 2-year Treasury yield, sensitive to monetary policy, dropped 1 basis point to 4.73%.

International oil prices are rising. West Texas Intermediate (WTI) crude oil increased by $0.70 (0.87%) to $81.60 per barrel, and Brent crude, the global oil price benchmark, rose $0.67 (0.79%) to $85.14 per barrel.