U.S. Commerce Secretary Hints at Tariff Relief Plan for Mexico and Canada on the 5th
February Private Sector Jobs Increase by 77,000... Lowest in Seven Months
The three major indices of the U.S. New York Stock Exchange showed a slight gain in early trading on the 5th (local time). Market anxiety eased somewhat as the U.S. left open the possibility of a compromise just one day after imposing a 25% tariff bomb on Canada and Mexico. Private sector job creation last month was found to have significantly slowed down.
As of 9:53 a.m. in the New York stock market on the day, the blue-chip-focused Dow Jones Industrial Average (Dow) was trading at 42,695.04, up 174.05 points (0.41%) from the previous trading day. The large-cap-focused S&P 500 index rose 12.21 points (0.21%) to 5,790.36, and the tech-heavy Nasdaq index was up 21.22 points (0.12%) at 18,306.38.
Market anxiety slightly eased after U.S. Commerce Secretary Gina Raimondo hinted at the possibility of a tariff compromise the previous day. In an interview with Fox News, she said, "Both Mexico and Canada tried to show during calls with me today (the 4th) that they can do better," and indicated that some relief measures related to the 25% tariffs, which took effect at midnight on the same day, could be announced as early as the 5th. She added, "If you follow the rules, President (Donald Trump) is considering offering relief to you," and said, "It’s not a suspension, but he will find a middle ground."
The U.S. implemented the 25% tariffs on Canada and Mexico starting at midnight on the 4th, after a one-month grace period. Regarding China, the U.S. raised the additional tariff rate to a total of 20%, adding another 10% on top of the 10% additional tariff imposed last month on the 4th. Countries have responded with retaliatory measures, escalating the tariff war. President Trump said in his first congressional speech of his second term at the U.S. Capitol in Washington D.C. the previous day that "a little confusion" is acceptable.
Michael Green, chief strategist at Simplify Asset Management, analyzed, "What we have repeatedly emphasized is the uncertainty brought by Trump," adding, "We are now in a situation where the market’s interpretation can change significantly with just one tweet or disclosure."
Amid growing tariff uncertainty triggered by Trump, private sector job creation also slowed, spreading concerns about an economic downturn. According to the February employment report released by ADP, a private labor market research firm, private sector nonfarm payrolls increased by 77,000. This is the smallest increase since July last year. It is significantly below both the previous month’s figure (186,000) and market expectations (141,000).
Nela Richardson, ADP’s chief economist, analyzed, "Policy uncertainty and slowing consumer spending may have caused layoffs and slowed hiring last month," adding, "Our data and other recent indicators show that companies are hesitant to hire as they assess future economic conditions."
The market is focusing on the U.S. Department of Labor’s February employment report, scheduled for release on the 7th, which is expected to provide a more accurate picture of the labor market than the ADP report, which excludes public sector employment. Experts expect nonfarm payrolls to have increased by 156,000 last month, surpassing January’s figure of 143,000. The unemployment rate is expected to have remained at 4.0%.
U.S. Treasury yields are declining. The 10-year U.S. Treasury yield, a global bond yield benchmark, fell 1 basis point (1 bp = 0.01 percentage points) from the previous trading day to 4.19%, while the 2-year Treasury yield, sensitive to monetary policy, moved down 4 basis points to around 3.9%.
By stock, automobile shares are rising amid the possibility of partial resolution of tariff conflicts between the U.S., Canada, and Mexico. U.S. automakers with production bases in Mexico, General Motors (GM) and Ford, are up 4.49% and 2.96%, respectively. Mexican food chain Chipotle is up 0.97%. Nvidia is down 0.66%, and Apple is weaker by 2.02%.
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