[New York Stock Exchange] Rises on U.S.-Vietnam Trade Deal... S&P, Nasdaq Hit Record Highs

Trump Announces "Trade Agreement Reached with Vietnam" on Social Media
20% Tariff on Vietnamese Imports... U.S. Exports to Vietnam Tariff-Free
Additional Agreements Expected Before Tariff Suspension Expires on the 8th
Private-Sector Employment Down 33,000 in June... First Decline in Over Two Years
June U.S. Department of Labor Employment Report in Focus on the 3rd

The three major indices on the New York Stock Exchange closed mixed on July 2 (local time). The S&P 500 and Nasdaq indices hit record highs after U.S. President Donald Trump announced the conclusion of a trade agreement with Vietnam. However, an unexpected decline in private-sector employment last month reignited concerns about an economic recession and limited the gains in the indices.

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On this day, the blue-chip Dow Jones Industrial Average finished at 44,484.42, down 10.52 points (0.02%) from the previous session. The large-cap S&P 500 index rose 29.41 points (0.47%) to close at 6,227.42, while the tech-heavy Nasdaq index climbed 190.24 points (0.94%) to 20,393.13, both setting new all-time highs.

News of the trade agreement between the U.S. and Vietnam drove gains in the S&P 500 and Nasdaq indices. President Trump announced on his own social media platform, Truth Social, "I am honored to announce that, after speaking with the General Secretary of the Communist Party of Vietnam, we have reached a trade agreement." He explained that under the agreement, the U.S. will lower tariffs on Vietnamese imports from the current 46% to 20%, and will be able to export U.S.-made products to Vietnam tariff-free. For goods routed through Vietnam from third countries such as China for export to the U.S., a 40% tariff will be imposed.

Vietnam is the second country, after the United Kingdom last month, to reach a trade agreement with the U.S. since President Trump announced reciprocal tariffs on April 2. President Trump also hinted the previous day at the possibility of a trade deal with India, raising expectations for additional agreements.

The U.S. is currently negotiating trade deals with major trading partners ahead of the expiration of the reciprocal tariff suspension on July 8. Previously, on April 9, President Trump implemented reciprocal tariffs on 57 economic entities (56 countries and the European Union) and applied a 90-day suspension. This measure will end at 12:01 a.m. on July 9. The U.S. is increasing pressure on countries such as Japan to finalize additional trade agreements before the tariff suspension expires.

However, a significant deterioration in private-sector employment indicators last month limited buying sentiment. According to U.S. private labor market research firm ADP, private-sector payrolls in June fell by 33,000 jobs. This is the first decline in private employment in two years and three months, since March 2023. The figure was far below market expectations (an increase of 99,000 jobs) and the May figure (an increase of 29,000 jobs). Concerns are growing that the labor market, which had remained relatively resilient despite aggressive tariff policies, may weaken more rapidly than expected.

A more accurate picture of employment will be available from the June employment report to be released by the U.S. Department of Labor on July 3. The market expects that nonfarm payrolls increased by 120,000 last month, below the May figure of 139,000. The unemployment rate is projected to rise from 4.2% in May to 4.3% in June. Nonfarm payrolls, as reported by the Department of Labor, include both private and public sector jobs and are considered the most reliable indicator of the overall health of the labor market.

Following the release of the ADP private employment data, the market has slightly increased its expectations for a rate cut in July. According to CME FedWatch, the federal funds futures market is currently pricing in a 23.3% probability that the Federal Reserve will lower the benchmark interest rate by 0.25 percentage points from the current 4.25?4.5% at the Federal Open Market Committee (FOMC) meeting scheduled for July 29?30. This is up slightly from 20.7% the previous day.

Sam Stovall, Chief Investment Strategist at CFRA Research, said, "If the employment report is significantly weak, the Fed could cut rates this month," adding, "This is especially likely if the employment indicators are weaker than expected."

Chris Zaccarelli, Chief Investment Officer (CIO) at Northlight Asset Management, stated, "The Fed has been able to remain patient before cutting rates because the labor market has been holding up very well," and predicted, "If the situation changes, the Fed will have no choice but to move (with a rate cut) sooner than they wanted."

The market is also watching whether President Trump's large-scale tax cut plan, a core policy agenda, will pass the House of Representatives. The so-called "One Big Beautiful Bill," which passed the Senate the previous day, is set for a House vote. Some Republican lawmakers in the House are voicing opposition, as the Senate bill would increase the fiscal deficit more than the version previously passed by the House. President Trump aims to sign the bill before Independence Day on July 4, but significant hurdles are expected before passage in the House.

U.S. Treasury yields are showing a slight upward trend. The yield on the benchmark 10-year U.S. Treasury note rose 3 basis points (1bp=0.01 percentage points) from the previous day to 4.28%, while the yield on the policy-sensitive 2-year Treasury note rose 1bp to 3.78%.

By stock, Nike, which produces half of its shoes in Vietnam, surged 4.06% on news of the U.S.-Vietnam trade agreement. Tesla jumped 4.97%. Although the company announced that vehicle deliveries in the second quarter of this year fell 14% from a year earlier, the result was better than Wall Street's expectations of up to a 20% decline, leading to a rise in the stock price. Microsoft (MS) fell 0.2%. The company decided to lay off 9,000 employees, which is less than 4% of its total workforce.