[New York Stock Market] Despite Powell Dismissing 'Big Cut', Broad Rise... Dow & S&P Reach Record Highs

Powell "US Economy Has Solid Foundation... Will Act Based on Data"
Indicates 0.25% Rate Cut in November and December Each
Focus on September Employment Report to Be Released on 4th

The three major indices of the U.S. New York Stock Exchange all closed higher on the 30th (local time). The market, which had deepened its losses after Federal Reserve (Fed) Chair Jerome Powell ruled out the possibility of a big cut (0.5 percentage point interest rate cut) and stated that rate cuts would not be rushed, reversed to a late rally. It appears that the market was more driven by expectations of a soft landing than disappointment over the retreat of big cut prospects. The market is waiting for the employment data to be released this week to assess the current economic situation and gauge the extent of further rate cuts.

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On this day in the New York stock market, the Dow Jones Industrial Average, centered on blue-chip stocks, closed at a record high of 42,330.15, up 17.15 points (0.04%) from the previous trading day. The S&P 500 index, focused on large-cap stocks, closed at 5,762.48, up 24.31 points (0.42%), also hitting a record high. The tech-heavy Nasdaq index ended trading at 18,189.17, up 69.58 points (0.38%).

Typically, the September stock market shows seasonal weakness, but this year it closed with gains. The Dow Jones Industrial Average rose 1.9%, while the S&P 500 and Nasdaq indices increased by 2% and 2.7%, respectively. This is analyzed to be supported by the Fed’s big cut on the 18th and expectations of a soft landing for the U.S. economy.

On this day, Chair Powell confirmed his stance at the National Association for Business Economics (NABE) annual meeting held in Nashville, Tennessee, that the U.S. economy still maintains a solid foundation and that interest rates will be lowered over time. He said, "The Federal Open Market Committee (FOMC) does not seem to be in a hurry to cut rates quickly," adding, "Ultimately, we will move based on incoming data." He further explained, "If the economy slows down more than expected, we will cut rates faster; if it slows down more slowly than expected, we may cut rates less." Powell also hinted that the FOMC would cut rates by 0.25 percentage points in both November and December.

As expectations for a soft landing of the U.S. economy grow, Wall Street’s outlook for a big cut (0.5 percentage point rate cut) is retreating. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on this day reflected a 65.5% chance that the Fed will cut rates by 0.25 percentage points in November, sharply up from 46.7% the previous day. Meanwhile, the probability of a 0.5 percentage point cut fell from 53.3% to 34.5%.

Emily Bowersock Hill, CEO of Bowersock Capital Partners, said, "The bull market has endured the weakest quarter in history this year," and forecasted, "With strong earnings, lower interest rates, and consumers still spending, the bull market is likely to remain intact at least until the end of the year."

Amid mixed expectations of a soft landing and recession concerns, the market is focusing on employment data that can gauge the U.S. economic situation. The key is the September employment report to be released by the U.S. Department of Labor on the 4th. According to a Bloomberg survey, nonfarm payrolls in September are expected to increase by 146,000, up 4,000 from August’s 142,000. The September unemployment rate is expected to remain steady at 4.2%. The market is likely to use the employment report to assess the current labor market and economy. In particular, if September nonfarm payrolls fall short of expectations or the unemployment rate is higher than estimated, concerns about a recession may increase.

Before the employment report, the Department of Labor’s August Job Openings and Labor Turnover Survey (JOLTs) will be released on the 1st, and the private labor market research firm ADP’s September employment report will be published on the 2nd. ADP’s data is expected to show an increase of 124,000 new private sector jobs in September, up from 99,000 in August. Weekly initial jobless claims data will also be released on the 3rd.

By individual stocks, Apple rose 2.29%. Alphabet, Google’s parent company, increased by 1.15%. Microsoft (MS) and Tesla rose 0.53% and 0.45%, respectively.

Government bond yields are on the rise. The U.S. 10-year Treasury yield, a global bond yield benchmark, traded at 3.79%, up 3 basis points from the previous trading day, while the 2-year Treasury yield, sensitive to monetary policy, rose 8 basis points to 3.64%.

International oil prices closed slightly lower amid rising tensions in the Middle East. West Texas Intermediate (WTI) crude oil closed at $68.17 per barrel, down $0.01 from the previous trading day, and Brent crude, the global oil price benchmark, closed at $71.77 per barrel, down $0.21.