[New York Stock Exchange] S&P and Nasdaq Rebound on Slowing Employment and Rate Cut Prospects... Alphabet Surges 9%

Job Openings Drop to 7.18 Million in July, Lowest in 10 Months
95% Odds on September Rate Cut; U.S. Treasury Yields Fall
Fed's Beige Book: "Economic Activity Stagnant in Most Districts"
Alphabet Surges 9% After Court Allows Google to Keep C

The three major indices on the New York Stock Exchange closed mixed on September 3 (local time). As employment indicators slowed, expectations for a rate cut in September increased, leading the S&P 500 Index and the Nasdaq Index to rebound in just one day. Notably, after a U.S. court ruling allowed Google to avoid selling its Chrome browser, shares of its parent company Alphabet surged 9%, driving a rally in technology stocks.

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On this day, the blue-chip Dow Jones Industrial Average closed at 45,271.23, down 24.58 points (0.05%) from the previous trading day. The large-cap S&P 500 Index rose by 32.72 points (0.51%) to 6,448.26, while the tech-focused Nasdaq Index jumped 218.097 points (1.03%) to 21,497.727.

By stock, Alphabet soared 9.01% following the previous day's court ruling. The court also allowed Google to pay Apple and other third parties to have its services pre-installed as the default browser, which pushed Apple shares up by 3.81%. Tesla rose 1.44%, and Meta, the parent company of Facebook, as well as Amazon, gained 0.26% and 0.29%, respectively. Optimism that big tech companies could overcome regulatory risks lifted technology stocks overall.

The catalyst for the rebound in the S&P 500 and Nasdaq indices was the expectation of a rate cut in September, triggered by signs of a slowdown in the labor market. According to the Job Openings and Labor Turnover Survey (JOLTs) released by the U.S. Department of Labor, the number of job openings in July was 7,181,000. This figure was down by 176,000 from June's 7,357,000 and fell short of the market forecast of 7,380,000. Experts analyzed that, due to President Donald Trump's aggressive tariff policies, companies were delaying new hiring as they watched the growing uncertainty.

In addition, the Federal Reserve's economic assessment indicated stagnation in economic activity across the United States. In its Beige Book report on economic trends, the Fed stated that among the 12 Federal Reserve Districts, "most regions saw little change in economic activity compared to the previous report," noting that "consumer spending stagnated or declined, and in many households, wage increases failed to keep pace with rising prices." On the other hand, in terms of prices, 10 regions saw moderate increases, while 2 regions experienced sharp rises in input costs.

The market raised expectations for a rate cut this month. According to the CME FedWatch tool, the federal funds rate futures market reflected a greater than 95% probability that the Fed would cut the current 4.25-4.5% annual rate by 0.25 percentage points at the upcoming Federal Open Market Committee (FOMC) meeting on the 17th.

Yields on U.S. Treasury bonds, which had surged the previous day following the ruling that reciprocal tariffs were illegal, quickly stabilized amid employment slowdown and rate cut expectations. The yield on the 30-year U.S. Treasury bond is currently at 4.90%, down 7 basis points (1bp=0.01 percentage point) from the previous trading day. The 10-year bond yield fell by 5 basis points to 4.22%, and the 2-year bond yield dropped by 3 basis points to 3.61%.

Oscar Munoz, a strategist at TD Securities, said, "A significant slowdown in labor market indicators could prompt the Fed to cut rates quickly," adding, "We are leaning toward buying during market corrections and expect the downward trend in rates to continue throughout the year."

Christopher Waller, a Fed governor and a potential candidate for the next Fed chair, also indicated support for a rate cut this month. In an interview with CNBC, he said, "When the labor market starts to deteriorate, it worsens quickly," and added, "We should start cutting rates at the next meeting." He continued, "Current rates are 1.0 to 1.5 percentage points above the neutral level," and "There could be multiple rate cuts over the next three to six months."

The more important indicator for gauging the labor market will be the August employment report to be released on the 5th. The market expects nonfarm payrolls to rise slightly to 75,000 in August, up from 73,000 in July. However, with increases staying below 100,000 for four consecutive months, this would mark the weakest trend since the COVID-19 pandemic in 2020. The unemployment rate is expected to rise from 4.2% in July to 4.3% in August. Prior to that, on the 4th, the August ADP private employment report and weekly initial jobless claims will be released.

Brett Kenwell, a U.S. investment analyst at eToro, commented that while the day's employment data "was not a warning sign, it reaffirmed that the U.S. labor market is easing," and noted, "While this suggests the Fed will pivot to rate cuts, in the long run, we should not welcome a noticeable slowdown in the labor market simply because of the benefits of lower rates."