[New York Stock Market] Rise on Strong Tech Stocks... Surge in Treasury Yields on Trump Election Outlook

US 10-Year Treasury Yield Rises 13bp
ISM June Manufacturing PMI at 48.5 Indicates 'Contraction'
Focus on This Week's Employment Data and FOMC Minutes
Powell Scheduled to Speak on the 2nd

The three major indices of the U.S. New York stock market all closed higher on the first trading day of the second half of the year, June 1 (local time), buoyed by gains in technology stocks. The market is focusing on this week's upcoming employment data and the political and economic uncertainties following last week's first presidential debate. U.S. Treasury yields surged, especially on long-term bonds, as the market weighed the increased chances of former President Donald Trump winning, following his decisive victory in the debate.

On the day at the New York Stock Exchange (NYSE), the blue-chip Dow Jones Industrial Average rose 50.66 points (0.13%) from the previous trading day to close at 39,169.52. The large-cap S&P 500 index gained 14.61 points (0.27%) to 5,475.09, and the tech-heavy Nasdaq index climbed 146.7 points (0.83%) to finish at 17,879.30.

By individual stocks, Tesla surged 6.05%. Apple jumped 2.91%, and Nvidia rose 0.62%. German sandal company Birkenstock gained 1.76% after UBS upgraded its investment rating from 'neutral' to 'buy.' Pet supplies company Chewy initially soared but closed down 6.61% after news that Roaring Kitty, the retail investor who led the 'meme stock' craze, purchased 9 million shares of the company. Earlier, GameStop, included in Roaring Kitty's portfolio revealed in early last month, fell 5.51%. Boeing rose 2.58% following its announcement to acquire Spirit AeroSystems, an aircraft fuselage manufacturer spun off 20 years ago, for $4.7 billion. Spirit AeroSystems jumped 3.35%.

The U.S. manufacturing activity indicator released that day showed contraction. The Institute for Supply Management (ISM) reported the June Manufacturing Purchasing Managers' Index (PMI) at 48.5, below both the expert forecast of 49.2 and the previous month's 48.7. A PMI below 50 indicates contraction, while above 50 indicates expansion.

Investors are turning their attention to the employment data to be released consecutively this week. On June 2, the May JOLTs job openings report will be published. Job openings are expected to decline to 7.86 million from the previous month's 8.059 million. On June 3, June ADP nonfarm payrolls and last week's unemployment claims will be released. The market expects ADP nonfarm payrolls to increase by 156,000 in June, surpassing May's 152,000. The most important labor market indicator is the June nonfarm payrolls report from the U.S. Department of Labor on June 5. Experts forecast a significant slowdown to 189,000 new jobs from May's 272,000. 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 (Fed) mainly references for monetary policy, rose 2.6% year-over-year in May. This matched market expectations and was 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.

On June 3, the minutes of the last Federal Open Market Committee (FOMC) meeting held last month will be released. Attention is focused on what views Fed officials exchanged, especially after the Fed reduced its forecast for rate cuts this year from three to one in the dot plot.

Fed officials will continue speaking this week. Fed Chair Jerome Powell will speak on June 2, and John Williams, President of the Federal Reserve Bank of New York, will speak on June 3 and 5.

The market is 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, led by AI leader 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 the election may pose resistance, but valuations are reasonable."

U.S. Treasury yields are surging. The 10-year U.S. Treasury yield, a global bond yield benchmark, rose 13 basis points (bp) (1 bp = 0.01 percentage points) to 4.47%, while the 2-year Treasury yield, sensitive to monetary policy, increased 4 bp to 4.76%. This reflects concerns that inflation could worsen if a second Trump administration begins, following his decisive win in the first presidential debate on May 27.

Jose Torres, Senior Economist at Interactive Brokers, analyzed, "Neither candidate proposed policies to reduce the increasingly unsustainable U.S. fiscal deficit during last week's presidential debate. Political uncertainty is rising as the media and various Democrats call for President Biden to withdraw from the race after his poor debate performance."

International oil prices rose more than 2% due to increased summer demand and supply concerns from Middle East conflicts. West Texas Intermediate (WTI) crude oil closed at $83.38 per barrel, up $1.84 (2.3%) from the previous day, and Brent crude, the global benchmark, rose $1.60 (1.9%) to $86.60.

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