Apple·Tesla Up... S&P and Nasdaq Hit Record Highs on Interest Rate Cut Hopes [New York Stock Market]

Rising Expectations for Interest Rate Cuts
Tech Stocks Surge Amid Sharp Drop in Government Bond Yields

After the closure for the US Independence Day holiday, the New York stock market hit another record high on the 5th (local time). This was influenced by increased expectations for an interest rate cut following the release of the US employment data for June.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average, which focuses on blue-chip stocks, closed at 39,375.87, up 67.87 points (0.17%) from the previous trading day. The large-cap-focused Standard & Poor's (S&P) 500 index rose 30.17 points (0.54%) to 5,567.19, and the tech-heavy Nasdaq index gained 164.46 points (0.90%) to close at 18,352.76, with both indices marking record highs for the second consecutive trading day.

Traders are working on the floor of the New York Stock Exchange (NYSE) in the United States. [Image source=AP·Yonhap News]

Signals that the US labor market is cooling have fueled expectations for a rate cut.

The Department of Labor announced that nonfarm payroll employment increased by 206,000 in June, exceeding Wall Street's forecast of 191,000. However, the May figure was revised down from an initial 272,000 increase to 218,000, and the April figure was also revised down from 165,000 to 108,000, reductions of 54,000 and 57,000 respectively.

The unemployment rate also rose, raising caution. The June unemployment rate was 4.1%, surpassing both the previous month's figure and market expectations of 4.0%. This is the highest level since November 2021.

The rise in unemployment and downward revisions to previous employment figures indicate a cooling labor market. These factors have further increased expectations for a rate cut. As the labor market cools and signs of economic slowdown emerge, the Federal Reserve (Fed) is seen to have more room to lower interest rates.

Buying momentum was concentrated in tech stocks. Shima Shah, Chief Global Strategist at Principal Asset Management, said, "The downward revisions to prior employment data and the rise in unemployment have increased the likelihood of a rate cut in September, and the bond market is clearly welcoming this." However, she added, "These figures do not help alleviate concerns about the direction of the US economy."

According to the FedWatch tool from the Chicago Mercantile Exchange (CME), the probability of the Fed cutting interest rates in September was priced at 77.4% near the market close. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) rose 0.22 points (1.79%) to 12.48 compared to the previous session.

Traders are working at the New York Stock Exchange (NYSE) in the United States. [Image source=EPA·Yonhap News]

By company, Tesla extended its winning streak to eight consecutive trading days. Tesla's stock closed at $251.52, up 2.08% from the previous day. Its market capitalization also recovered to $802.1 billion. With this gain, Tesla's total return for the year turned positive. Apple, the iPhone manufacturer, also closed at $226.34, up 2.16% from the previous day. Over the four trading days in the second half of this year, Apple's stock price has continuously risen, reaching an all-time high in the $226 range.

Meta Platforms and Alphabet A also rose 5.87% and 2.57%, respectively, driving the indices. This is interpreted as a process of catching up with the previously large gains made by Microsoft (MS), Apple, Nvidia, Tesla, and others.

US department store chain Macy's stock jumped more than 9% on news that investors raised their acquisition offer price. The potential acquirers, including Brigade Capital, increased their offer from $24 per share to $24.80. Novo Nordisk, the maker of the obesity drug Wegovy, saw its stock rise more than 2% despite a negative academic report. Earlier, researchers from Harvard University published a report stating that Wegovy could rarely cause blindness.

Meanwhile, John Williams, President of the Federal Reserve Bank of New York, indicated in a public statement that while significant progress has been made in slowing inflation, the war against inflation is not over yet. In a statement released for an event held by the Reserve Bank of India (RBI) in Mumbai, India, he said, "We have seen considerable progress in bringing down inflation," but added, "However, there is still a long way to go to consistently achieve our 2% target."