New York Stock Market Rises Awaiting Employment Data and FOMC Minutes

Minutes of the FOMC Meeting Released on the 3rd
US Labor Department to Announce June Nonfarm Payrolls on the 5th
Market Closed on the 4th for Independence Day

The three major indices of the U.S. New York stock market are showing an upward trend in the early trading hours on the first trading day of the second half of the year, July 1 (local time). The market is awaiting employment indicators to be released this week, including the Job Openings and Labor Turnover Survey (JOLTs), ADP employment report, and nonfarm payrolls and unemployment rate. The minutes of the June Federal Open Market Committee (FOMC) meeting are also set to be released, drawing investors' attention.

As of 9:40 a.m. at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average is up 0.58% from the previous close, trading at 39,345.25. The large-cap focused S&P 500 index is up 0.23% at 5,473.25, and the tech-heavy Nasdaq index is up 0.14% at 17,757.71.

By individual stocks, German sandal company Birkenstock is rising 2.01% following UBS's upgrade of its investment rating from 'neutral' to 'buy.' Pet supplies company Chui is up 5.78% after news that Roaring Kitty, the retail investor who led the 'meme stock' craze, purchased 9 million shares of the company. GameStop, included in Roaring Kitty's portfolio revealed earlier this month, is down 6.52%. Boeing is up 3.06% after announcing it will acquire Spirit AeroSystems, an aircraft fuselage manufacturer spun off 20 years ago, for $4.7 billion. Spirit AeroSystems is up 4.59%. Nvidia is down 1.83%, while Apple and Alphabet, Google's parent company, are up 1.39% and 0.58%, respectively.

Investors' focus is on the employment data to be released consecutively this week. On July 2, the May JOLTs job openings will be announced. Job openings are expected to fall to 7.86 million, below the previous month's 8.059 million. On July 3, the June ADP nonfarm payrolls and last week's unemployment claims will be released. The market expects June ADP nonfarm payrolls to increase by 156,000, surpassing May's 152,000. The most important indicator to assess the labor market is the June nonfarm payrolls report from the U.S. Department of Labor on July 5. Experts forecast a significant slowdown to 189,000 new jobs from 272,000 in the previous month. The unemployment rate is expected to remain steady at 4%.

With recent inflation rates declining, attention is focused on whether signs of cooling in the labor market, which had previously fueled inflation, will emerge. The Personal Consumption Expenditures (PCE) price index, which the Federal Reserve mainly references for monetary policy, rose 2.6% year-over-year in May. This matches market expectations and is a slowdown from April's 2.7%. The core PCE price index, excluding volatile food and energy, also rose 2.6% year-over-year, meeting expectations and down from 2.8% in April.

The market currently reflects expectations of one to two interest rate cuts within the year. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market on this day prices in a 61.7% chance 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 greater cut in November is 74.7%.

On July 3, the minutes of the last month's FOMC meeting will be released. With the Fed having lowered its forecast for the number of rate cuts this year from three to one via the dot plot, attention is focused on the discussions among officials.

Fed officials will continue to speak this week. On July 2, Fed Chair Jerome Powell will speak, followed by John Williams, President of the Federal Reserve Bank of New York, on July 3 and 5.

The market is also watching whether the tech sector's strength will continue into the second half of the year. The S&P 500 index surged 14.5% and the Nasdaq index jumped 18.1% in the first half, driven by a rally in AI leader stocks like Nvidia. The Dow Jones Industrial Average rose only 3.8%.

King Rip, Chief Strategist at Baker Avenue Wealth Management, analyzed, "There is little evidence that tech stocks will slow down. Seasonal weakness in September and October, profit-taking, and elections may pose resistance, but valuations are reasonable."

U.S. Treasury yields are rising sharply. The 10-year U.S. Treasury yield, a global bond yield benchmark, rose 11 basis points (1 bp = 0.01 percentage points) to 4.45%, while the 2-year Treasury yield, sensitive to monetary policy, increased 6 basis points to 4.78%. This reflects concerns that inflation could worsen if former President Donald Trump, who won the first U.S. presidential debate on June 27, begins a second term.

International oil prices are rising on expectations of increased summer demand and production cuts by oil-producing countries. West Texas Intermediate (WTI) crude oil rose $0.49 (0.6%) to $82.03 per barrel, and Brent crude, the global benchmark, increased $0.54 (0.64%) to $85.55 per barrel.

Meanwhile, July 4 is the U.S. Independence Day, and financial markets will be closed. On July 3, markets will close early at 1 p.m.