[New York Stock Market] Stocks Surge Broadly as Concerns Over Employment Cooling Ease... Nasdaq Up 2.87%

Unemployment Claims Drop to Lowest in a Year
Yen Weakens Against Dollar... Concerns Over Yen Carry Trade Unwinding Ease
Richmond Fed President: "Not Job Cuts but Employment Slowdown"
"Economic, Geopolitical, and Election Uncertainties... Volatility Expected to Increase"

The three major indices of the U.S. New York Stock Exchange all rose on the 8th (local time). Last week, the number of new unemployment claims showed the largest decrease in a year, partially alleviating concerns about a cooling labor market, which had been a cause for recent recession expectations. The Japanese yen also weakened against the dollar, calming worries about the unwinding of the 'yen carry trade.'

On that day in the New York stock market, the Dow Jones Industrial Average, centered on blue-chip stocks, closed at 39,446.49, up 683.04 points (1.76%) from the previous trading day. The S&P 500 index, focused on large-cap stocks, rose 119.81 points (2.3%) to close at 5,319.31, marking the largest daily gain since November 2022. The tech-heavy Nasdaq index jumped 464.21 points (2.87%) to close at 16,660.02.

The significant decrease in new unemployment claims last week stimulated investor sentiment. According to the U.S. Department of Labor on that day, new unemployment claims for the week of July 28 to August 3 totaled 233,000, falling short of both the expert forecast of 241,000 and the revised figure of 250,000 for the previous week. Notably, this was a decrease of 17,000 claims compared to the prior week, representing the largest drop in a year. Concerns about a cooling labor market, which had rapidly spread following the July employment report released on the 2nd, were partially eased after the announcement of the unemployment claims data.

However, continuing unemployment claims, which represent those claiming benefits for at least two weeks, were recorded at 1,875,000 for the week of July 21 to 27. This exceeded both the market forecast of 1,870,000 and the revised figure of 1,869,000 for the previous week.

As fears of a rapid slowdown in the labor market subside, government bond yields are on the rise. The 10-year U.S. Treasury yield, a global benchmark for bond yields, increased by 2 basis points (1bp = 0.01 percentage points) from the previous day to 3.98%, while the 2-year U.S. Treasury yield, sensitive to monetary policy, rose 3 basis points to 4.03%.

Market opinions diverge regarding the future trajectory of the employment market, with some expecting a gradual slowdown and others anticipating a rapid cooling.

Karl B. Weinberg, Chief Economist at High Frequency Economics, stated, "The data suggests we should watch for signals of a real weakening in the labor market going forward," adding, "Those signals indicate a gradual slowdown rather than a recession."

On the other hand, Eliza Winker, Economist at Bloomberg Economics (BE), said, "I believe layoffs are increasing as the economy softens," and added, "Our baseline forecast is that the unemployment rate will rise to 4.5% by October." The unemployment rate increased from 4.1% in June to 4.3% in July.

Meanwhile, a Federal Reserve (Fed) official recently commented that the recent cooling of the labor market stems more from a slowdown in hiring than from increased layoffs. Thomas Barkin, President of the Richmond Federal Reserve Bank, stated that day, "Companies are deciding to reduce hiring rather than to lay off workers." This is interpreted as a judgment that the market's fear regarding the recent employment slowdown is excessive. He further expressed optimism, saying, "I am quite optimistic that we will see good numbers on inflation in the coming months."

Experts believe that stock market volatility may continue for the time being. In particular, the fact that investor sentiment moves sharply based on a single piece of news indicates that market psychology itself has become quite fragile.

Liz Young Thomas, Chief Investment Strategist at SoFi, commented on the stock market rebound following last week's unemployment claims announcement, saying, "The market is becoming more sensitive to all incoming data, which means volatility will increase if conflicting data emerges," and added, "Today’s rebound is what people have been waiting for, but good news is needed to prove that the rally can continue."

Joseph Ferrara, Investment Strategist at Gateway Investment Advisors, forecasted, "The recent volatility shocks in the market may be a preview of the rest of the year," and said, "Concerns about the economy, geopolitical conflicts, and the upcoming November election could keep investors on edge for the next few months." He emphasized, "Investors should prepare their portfolios for increased volatility from now until the end of the year."

By individual stocks, Nvidia surged 6.13%. Broadcom soared 6.95%. Meta, the parent company of Facebook, rose 4.24%, while Alphabet and Apple, the parent companies of Google and Apple respectively, increased by 1.92% and 1.66%. Microsoft (MS) also gained 1.24%. Pharmaceutical company Eli Lilly jumped 9.22% after reporting quarterly earnings that exceeded expectations and raising its annual earnings outlook. Warner Bros. Discovery and Bumble plunged 8.95% and 29.16%, respectively, following disappointing earnings reports.

International oil prices rose. West Texas Intermediate (WTI) crude oil closed at $79.16 per barrel, up $0.96 (1.28%) from the previous trading day, while Brent crude, the global benchmark, rose $0.83 to $79.16 per barrel. Concerns over supply reductions due to instability in the Middle East and expectations of increased demand following improved U.S. employment data contributed to the rise in oil prices.