Attention on FOMC Meeting Results This Afternoon
September Rate Cut Hint Expected
US July Private Employment Below Expectations
Wage Growth at Lowest in 3 Years
Meta and Qualcomm Earnings Also Announced Today
The three major indices of the U.S. New York stock market showed mixed trends in early trading on the 31st (local time). Investor sentiment, centered on technology stocks, is reviving amid expectations that the U.S. Federal Reserve (Fed) will signal a rate cut at the upcoming Federal Open Market Committee (FOMC) meeting in September. The private sector wage growth rate this month also hit its lowest level in three years, supporting expectations that the Fed will soon begin cutting interest rates.
As of 10:07 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average was down 0.12% from the previous close, at 40,695.52. The large-cap-focused S&P 500 index was up 1.36% at 5,510.56, and the technology-heavy Nasdaq index was trading 2.33% higher at 17,546.26.
By stock, large technology stocks are strong. U.S. semiconductor company AMD surged 8.17% after reporting second-quarter earnings that exceeded expectations. Nvidia, the AI leader, rebounded 11.32% after Morgan Stanley named it a "top pick," recovering from a 7% drop the previous day. Microsoft (MS), which fell in after-hours trading the previous day due to concerns that its AI and cloud business profitability fell short despite better-than-expected sales and net income, was down 0.88%. U.S. aircraft manufacturer Boeing rose 0.63% following the announcement of its new CEO.
Investor attention is focused on the FOMC meeting results to be released this afternoon. The Fed is expected to keep the benchmark interest rate steady at 5.25-5.5% for the eighth consecutive time, with the key point being whether it will provide clues about the timing and number of rate cuts this year. The market is largely pricing in a rate cut in September. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market fully reflects a 100% probability that the Fed will cut rates by at least 0.25 percentage points at the September FOMC meeting. The chance of a 0.5 percentage point cut in September is 12.3%.
Bryce Doty, Senior Portfolio Manager at Sit Investment Associates, said, "Investors are hoping the Fed will send a strong signal of a rate cut in September. However, if that happens, it raises the question of why the Fed is not cutting rates immediately, so the Fed is unlikely to express excessive confidence about future rate cuts." He added, "As a result, investors are likely to be disappointed by the Fed's tone and attitude after the FOMC."
Ahead of the FOMC, employment data released this morning signaled a slowdown in the U.S. labor market, laying the groundwork for the Fed to cut rates. According to the U.S. employment report released by private labor market research firm ADP, private sector job growth in July increased by 122,000, marking the lowest level this year. This was below both market expectations (147,000 increase) and June's figure (155,000 increase). Wage growth slowed to its lowest level in three years since 2021. Over the past 12 months, wages for workers who stayed at the same job rose 4.8% compared to a year ago, while wages for job changers increased 7.2% during the same period. Both are the lowest levels since 2021 and fell by 0.1 and 0.5 percentage points respectively compared to the previous month.
Nela Richardson, Chief Economist at ADP, analyzed, "As wage growth slows, the labor market is cooperating with the Fed's efforts to ease inflation. If inflation rebounds, it will not be because of the labor market."
Following Microsoft's earnings report yesterday, big tech companies continue to release earnings today. Meta and Qualcomm are reporting earnings today, with Apple, Amazon, and Intel scheduled to announce theirs the following day.
U.S. Treasury yields are weakening. The 10-year U.S. Treasury yield, a global bond yield benchmark, fell 4 basis points (1 bp = 0.01 percentage points) from the previous trading day to 4.09%, while the 2-year U.S. Treasury yield, sensitive to monetary policy, dropped 2 basis points to around 4.33%.
International oil prices are rising nearly 3% amid escalating tensions in the Middle East. West Texas Intermediate (WTI) crude oil surged $2.22 (2.97%) from the previous trading day to $76.95 per barrel, while Brent crude, the global oil price benchmark, rose $2.15 (2.75%) to $80.22.
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