[New York Stock Market] Rise on FOMC Minutes Suggesting 'September Pivot'... Nasdaq Up 0.57%

July FOMC Minutes Released
"Majority Support September, Many Advocate July Rate Cut"
Focus on Employment Risks... Inflation Progress Assessed
Labor Dept Lowers Annual Nonfarm Payrolls by 810,000
Watch Powell's Jackson Hole Speech on 23rd
Key Is Rate Cut Size This Year... Market Expects 1%P Reduction

The three major indices of the U.S. New York stock market all closed higher on the 21st (local time). Investors continued buying, confident of a rate cut in September, following the release of the July Federal Open Market Committee (FOMC) minutes that day. The market is focusing on the speech by Jerome Powell, Chair of the U.S. Federal Reserve (Fed), at the Jackson Hole meeting on the 23rd, seeking clues about the scale of the rate cut.

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On that day in the New York stock market, the Dow Jones Industrial Average, centered on blue-chip stocks, closed at 40,890.49, up 55.52 points (0.14%) from the previous trading day. The S&P 500, focused on large-cap stocks, rose 23.73 points (0.42%) to 5,620.85, and the Nasdaq, centered on tech stocks, jumped 102.05 points (0.57%) to 17,918.99.

The July FOMC minutes released that afternoon supported the outlook that a rate cut in September is almost certain unless there is an unexpected event. According to the minutes, the majority of Fed officials viewed a rate cut in September as appropriate, and many had already advocated for a cut in July. The minutes stated, "Several officials saw recent progress in inflation and rising unemployment as providing reasonable grounds for lowering the target range by 25 basis points (1bp = 0.01 percentage point) at this meeting or supported such a decision," and "a broad majority judged that if incoming data align with expectations, it would be appropriate to ease policy at the next (September) meeting."

Concerns about cooling employment were a factor that led Fed officials to form a consensus on shifting monetary policy. Most officials viewed the risks of inflation and employment slowdown as now being at the same level. The minutes noted, "A majority of participants mentioned that the risk to the employment goal had increased," and "some participants pointed out that if labor market conditions gradually ease further, the situation could worsen."

Indicators also showed that the U.S. labor market is not as hot as initially expected. On that day, the U.S. Department of Labor revised the annual (April last year to March this year) nonfarm payrolls downward by 818,000 compared to previously announced figures. As a result, the average monthly new employment during this period decreased from 246,000 to 178,000, a reduction of 68,000, representing a 27.6% decrease. This scale of downward revision in nonfarm payrolls is the largest in 15 years since 2009 (824,000).

With Fed officials having already advocated for a rate cut in September last month and additional indicators showing the labor market cooling faster than expected, the possibility of a rate cut next month is gaining more momentum. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market fully reflects a 100% probability that the Fed will cut rates by at least 0.25 percentage points in September. The likelihood that the Fed will implement at least one big cut (0.5 percentage point rate cut) in the remaining three FOMC meetings this year?in September, November, and December?and lower rates by more than 1 percentage point by year-end is priced in at 79%.

Now, investors' attention is turning to the annual economic policy symposium, the Jackson Hole meeting, which opens on the 22nd in Wyoming. Chair Powell is expected to provide signals about rate cuts and clues about the scale of cuts within the year during his scheduled speech on the 23rd. The market is anticipating dovish (monetary easing-favoring) messages, but depending on Powell's remarks, expectations could turn into disappointment.

Chris Zaccarelli, Chief Investment Officer (CIO) of Independence Advisors Alliance, said, "Everyone is looking ahead to see what the Fed will do next," and evaluated, "The market is focusing on the Fed's rate cut cycle, at least temporarily moving away from fears about growth."

Jack Janasiewicz, Senior Portfolio Strategist at Natixis Investment Managers Solutions, analyzed, "What matters is the dovish tone we expect from Chair Powell's speech," adding, "Inflation is moving toward 2%, and if signals of labor market easing are added, Powell will have little reason to maintain a hawkish (monetary tightening-favoring) stance."

U.S. Treasury yields are declining. The 2-year U.S. Treasury yield, sensitive to monetary policy, fell 5 basis points to 3.94%, and the 10-year U.S. Treasury yield, a global bond yield benchmark, traded down 1 basis point to around 3.8% compared to the previous day.

By individual stocks, U.S. retailer Target surged 11.2% after reporting quarterly earnings that exceeded market expectations. U.S. department store brand Macy's fell 12.91% after lowering its annual sales forecast.

International oil prices declined on the downward revision of U.S. employment data. West Texas Intermediate (WTI) crude oil closed at $71.93 per barrel, down $1.24 (1.69%) from the previous trading day, and Brent crude, the global oil price benchmark, closed at $76.05 per barrel, down $1.15 (1.49%).