New York Stock Market Mixed in Early Trading... Cautious Amid Recession Concerns

Tech Stocks Weaken with Nvidia Down 1.6%
July Hiring and Job Change Report, Fed Beige Book Released
August Nonfarm Payroll Report on the 6th is Key

The three major indices of the U.S. New York Stock Exchange showed mixed trends in early trading on the 4th (local time). The market, which plunged the previous day due to fears of a U.S. economic recession and a 10% plunge in Nvidia, continued to show signs of caution and uncertainty. Technology stocks, including Nvidia, remained weak.

As of 9:43 a.m. in the New York stock market on this day, the Dow Jones Industrial Average, centered on blue-chip stocks, was up 0.2% from the previous trading day at 41,018.38. The S&P 500, focused on large-cap stocks, rose 0.02% to 5,529.94, while the Nasdaq, centered on technology stocks, was down 0.34% at 17,078.32.

The previous day, news of a contraction in the manufacturing sector, a key pillar of the U.S. real economy, spread fears of a recession (R). The Institute for Supply Management (ISM) reported that the August Manufacturing Purchasing Managers' Index (PMI) stood at 47.2. A manufacturing PMI above 50 indicates expansion, while below 50 indicates contraction. The ISM manufacturing PMI has remained below 50 for five consecutive months, raising concerns that the manufacturing sector is in a prolonged downturn.

Investor sentiment rapidly froze, causing technology stocks to fall sharply. In particular, recession fears combined with skepticism about artificial intelligence (AI) led to a plunge in Nvidia. Nvidia's stock price fell 9.53% the previous day, wiping out $278.9 billion in market capitalization in a single day. Especially, news that the U.S. Department of Justice issued a subpoena to Nvidia, which dominates the AI semiconductor market, for an antitrust investigation further dragged down the stock price. The Philadelphia Semiconductor Index, composed of semiconductor-related stocks, plunged 7.75%.

Wall Street sees the sharp drop the previous day as partly related to seasonal psychological burdens. September is generally considered the worst month for stock performance throughout the year, and this perception further dampened investor sentiment.

Experts expect volatility to continue until the release of the nonfarm payroll report on the 6th, which will influence the Federal Reserve's (Fed) rate cut decisions. Neil Birrell, Chief Investment Officer (CIO) at Premier Milton Investors, said, "Disappointing numbers will make the market somewhat uneasy," adding, "Due to the lack of certainty, it is hard to recommend buying in a down market ahead of Friday's (6th) employment report release."

Some analysts argue that since the market recovered after a sharp drop caused by the July employment report shock earlier last month, this downturn could present a buying opportunity. Chris Heise, Chief Investment Officer at Merrill Lynch and Bank of America (BoA) Private Bank, said, "The next eight weeks will be a very important opportunity," and added, "You can rebalance and diversify your portfolio to make the market work in your favor."

The market is focusing on key employment indicators to be released this week amid recession concerns. First, the July Job Openings and Labor Turnover Survey (JOLTs) will be released today. On the 5th, ADP's August private employment report and weekly initial and continuing unemployment claims will be published, followed by the Labor Department's August employment report on the 6th. The employment report is crucial. The market expects nonfarm payrolls to have increased by 165,000 last month, with the unemployment rate at 4.2%. If nonfarm payrolls fall below 100,000 or the unemployment rate rises above 4.4%, the Fed is expected to implement a big cut of 0.5 percentage points in September.

In the afternoon, the Fed's Beige Book, a report on economic conditions, will also be released.

Currently, the interest rate futures market reflects a 61% probability that the Fed will cut rates by 0.25 percentage points in September and a 39% chance of a 0.5 percentage point cut.

U.S. Treasury yields are slightly down. The 2-year U.S. Treasury yield fell 3 basis points (1 bp = 0.01 percentage points) to 3.85%, while the 10-year U.S. Treasury yield, a global bond benchmark, remained steady at 3.83% compared to the previous trading day.

By stock, Nvidia is down 1.56%. Other technology stocks are also weak, with Apple down 1.2% and Microsoft (MS) down 0.67%. U.S. Steel rose 1.98% after CEO David Burritt stated that if the sale of Nippon Steel is canceled, the company would close the plant and relocate its headquarters from Pittsburgh to another location.

International oil prices, which fell more than 4% the previous day due to recession concerns in the U.S. and China, continued to weaken. West Texas Intermediate (WTI) crude oil fell $0.59 (0.84%) to $69.75 per barrel, while Brent crude, the global oil price benchmark, dropped $0.77 (1.04%) to $72.98 per barrel.