ADP Private Employment Increased by 122,000 in December
Unemployment Claims Below Expectations
Interest Rate Hold Raises Caution... Government Bond Yields Rising
Focus on Last Month's FOMC Meeting Minutes
The three major indices of the U.S. New York Stock Exchange declined on the 8th (local time). After a sharp drop in the New York stock market due to the rise in U.S. Treasury yields the previous day, the market is digesting mixed employment data amid caution and awaiting the release of the Federal Open Market Committee (FOMC) minutes. The U.S. Treasury yields surged past 4.7% on the 10-year note, driven by strong service sector data and expectations of a prolonged pause in the benchmark interest rate.
As of 12:53 PM in the New York stock market, the Dow Jones Industrial Average, which focuses on blue-chip stocks, was down 0.28% to 42,410.43 compared to the previous day. The S&P 500, centered on large-cap stocks, fell 0.33% to 5,889.33, and the tech-heavy Nasdaq dropped 0.54% to 19,385.06.
The employment data released that morning was mixed. According to ADP, a private U.S. labor market research firm, private sector job additions in December last year increased by 122,000. This was the lowest figure in four months since August last year, falling short of both November's 146,000 and market expectations of 139,000. The wage growth rate was 4.6% year-over-year, the lowest since July 2021, indicating signs of a cooling labor market.
On the other hand, claims for unemployment benefits, which indicate layoffs by U.S. companies, decreased. According to the U.S. Department of Labor, new unemployment claims for the week of December 29 to January 4 totaled 201,000. This was the lowest level in 11 months since February last year, below the revised figure of 211,000 for the previous week and the expert forecast of 214,000.
The market is reviewing the employment data released that morning while awaiting the FOMC minutes for December last year, which will be released in the afternoon. It is expected that additional clues about the Fed's future interest rate path, which previously indicated a cautious monetary easing stance, can be found through the FOMC minutes. Especially since the strong service sector data released the previous day has increased the likelihood of a prolonged Fed rate pause, attention is focused even more on the FOMC minutes released today.
U.S. Treasury yields surged after the strong service sector data the previous day and surpassed 4.7% on the 10-year note today. The yield on the U.S. 10-year Treasury, a global bond yield benchmark, rose 1 basis point (1 bp = 0.01 percentage points) from the previous trading day to 4.7%. This is the highest level in about eight months since the end of April last year. The yield on the U.S. 2-year Treasury, which is sensitive to monetary policy, is moving at 4.27%, down 1 bp from the previous day.
The possibility of inflation triggered by tariff hikes from President-elect Donald Trump, who will be inaugurated on the 20th, is also weighing on Treasury yields and investor sentiment. The market is concerned that U.S. Treasury yields could exceed 5% on the 10-year note.
U.S. CNN reported that Trump is expected to use the International Emergency Economic Powers Act (IEEPA) card to implement his universal tariff pledge. As anticipated, it is reported that he will declare a national economic emergency and impose tariffs under presidential authority. However, some expect the impact of tariffs on inflation to be limited. Christopher Waller, the Fed's second-in-command, said today, "Tariffs will not have a significant or lasting impact on inflation." He added, "Inflation will continue to make progress toward the 2% target," and "We will continue to support policy rate cuts this year."
Sarat Setty, Managing Partner at DCLA, said, "Profit-taking has occurred, and portfolio adjustments have been made as the equity portion increased," adding, "Considering the presidential inauguration and the start of the corporate earnings season, there could be potential volatility."
By stock, technology shares are declining. Nvidia, the leader in artificial intelligence (AI), is down 0.56%. Palantir, an AI software company, is down 3.66%. U.S. semiconductor company AMD plunged 4.98% after HSBC downgraded its investment rating.
International oil prices are down more than 1% due to an increase in U.S. crude oil inventories. West Texas Intermediate (WTI) crude oil is trading at $73.39 per barrel, down $0.86 (1.16%) from the previous day, and Brent crude, the global oil price benchmark, is trading at $76.16 per barrel, down $0.89 (1.16%).
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