[New York Stock Market] Mixed Close Near Flat... Digesting FOMC Minutes and Employment Data, Market Observes

FOMC Minutes, 'Trumplation' Concerns
December Private Employment Below Expectations... Unemployment Claims Decrease
Focus on Labor Department Employment Report to be Released on the 10th

The three major indices of the U.S. New York stock market closed mixed in a narrow range on the 8th (local time). Following a sharp decline in the market due to a rise in U.S. Treasury yields the previous day, investors digested the Federal Open Market Committee (FOMC) minutes and conflicting employment data, failing to find a clear investment direction and instead took a wait-and-see approach. The U.S. Treasury yield briefly surpassed 4.7% on the 10-year note before slightly easing.

In the New York stock market that day, the blue-chip-focused Dow Jones Industrial Average (Dow) closed at 42,635.2, up 106.84 points (0.25%) from the previous trading day. The large-cap-focused S&P 500 index rose 9.22 points (0.16%) to 5,918.25, while the tech-heavy Nasdaq index fell 10.8 points (0.06%) to close at 19,478.88.

The Fed's December FOMC minutes released that afternoon reaffirmed concerns about "Trumflation" (inflation caused by Trump's policies). The minutes stated, "Almost all participants judged that the upside risks to the inflation outlook had increased," citing stronger-than-expected inflation indicators and potential impacts from changes in trade and immigration policies as the basis for this judgment. This reflected concerns that the tariff hikes and immigration policies of President-elect Donald Trump, who will take office on the 20th, would lead to higher import prices, increased labor costs, and inflation. However, there was no explicit mention of Trump himself.

The minutes also reiterated that the pace of monetary easing would slow down. It stated, "In discussing the outlook for monetary policy, participants judged that the committee had reached or was approaching an appropriate point to slow the pace of policy accommodation." It introduced comments from members noting that the policy rate was closer to the "neutral value" compared to when the rate-cutting cycle began in September last year, and that a more cautious and gradual approach should be taken in monetary policy decisions over the coming quarters.

The market ignored the cautious monetary easing stance suggested by the FOMC minutes and reduced losses. Christopher Waller, known as the Fed's "number two," expressed a view differing from the FOMC minutes in a public speech that day. He said, "Tariffs will not have a significant or lasting impact on inflation," adding, "Inflation will continue to progress toward the 2% target, and I support continued policy rate cuts through 2025."

U.S. Treasury yields moved sideways after surging the previous day due to strong service sector data. The benchmark 10-year U.S. Treasury yield stood at 4.68%, and the 2-year Treasury yield, sensitive to monetary policy, was at 4.27%, both hovering around the previous day's levels. The 10-year Treasury yield briefly surpassed 4.7% that day, marking the highest level since late April last year.

The market is also concerned that the 10-year U.S. Treasury yield could exceed 5% amid Trumflation fears. U.S. CNN reported that President-elect Trump is expected to invoke the International Emergency Economic Powers Act (IEEPA) as anticipated to implement his universal tariff pledge.

Ahead of the U.S. Labor Department's December employment report scheduled for the 10th, the employment data released that day were mixed. According to ADP, a private U.S. labor market research firm, private sector job additions in December increased by 122,000. This was the lowest in four months since August last year and fell 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 cooling in the labor market.

On the other hand, unemployment claims, which indicate layoffs by U.S. companies, decreased. According to the U.S. Labor Department, initial 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 previous week's figure of 211,000 and expert expectations of 214,000.

Investors are focusing on the Labor Department's employment report release. Experts expect nonfarm payrolls to have increased by 154,000 in December, down from 227,000 in the previous month. The unemployment rate is forecast to remain steady at 4.2%.

Jeffrey Roach, chief economist at LPL Financial, said, "Uncertainty surrounding President-elect Trump's policies remains significant, making it increasingly difficult to predict the paths of interest rates, growth, and inflation," adding, "If there is a surprise in the nonfarm payroll report on the 10th, the market could experience volatility."

By individual stocks, AI software company Palantir fell 2.51%. U.S. semiconductor company AMD dropped 4.31% after HSBC downgraded its investment rating. Apple and Microsoft (MS) rose 0.2% and 0.52%, respectively.

Meanwhile, the New York stock market will be closed on the 9th, the day after. The stock exchange will close as the funeral day of former President Jimmy Carter, who passed away at the end of last month, has been designated as a "National Day of Mourning."