[New York Stock Exchange] Rate Cut Expectations Rise on Slowing Employment... Indices Close Higher

Betting on Traditional Industries and Blue-Chip Stocks

The three major indices on the New York Stock Exchange closed higher for the second consecutive day. The unexpected decline in U.S. private employment fueled expectations for an interest rate cut.

AFP Yonhap News

On December 3 (local time), the Dow Jones Industrial Average, which focuses on blue-chip stocks, ended the session at 47,882.90, up 408.44 points (0.86%) from the previous trading day. The S&P 500 Index, which tracks large-cap stocks, rose by 20.35 points (0.30%) to close at 6,849.72, while the tech-heavy Nasdaq Composite Index finished at 23,454.09, up 40.42 points (0.17%).

By sector, all industries except utilities and technology posted gains. Financials and energy stocks jumped by more than 1%. The Russell 2000 Index, which focuses on small-cap companies, surged by 1.91%. The Philadelphia Semiconductor Index climbed by 1.83%, continuing its strong rally for the second consecutive day.

Looking at individual stocks, technology shares within the Dow Jones Industrial Average were weak, but there was strong buying interest in retail, financial, and industrial stocks such as Walmart, Home Depot, Procter & Gamble, Coca-Cola, UnitedHealth, Caterpillar, and American Express.

The weakness in technology stocks appeared to be driven by negative news related to Microsoft (MS). U.S. IT media outlet The Information reported that MS had lowered its sales growth targets for some artificial intelligence (AI) agent products and reduced sales quotas for its sales staff, noting that "it is unusual for MS to lower sales quotas for specific products." The products affected by these measures reportedly include the enterprise AI platform 'Foundry.' MS responded by stating, "We have not lowered sales quotas or targets for our sales staff." However, despite MS's rebuttal, investor sentiment toward technology stocks did not recover, with Nvidia, Apple, and Amazon each falling by around 1%. MS declined by 2.5%.

Elsewhere, Salesforce jumped more than 5% in after-hours trading after its third-quarter adjusted earnings per share (EPS) exceeded expectations. American Eagle Outfitters, a U.S. apparel company, saw its stock soar by 15% after not only reporting strong third-quarter results but also raising its annual earnings outlook.

According to the ADP National Employment Report released that day, private employment in November decreased by 32,000 compared to the previous month. This result is the opposite of market expectations, which had forecast an increase of 10,000 jobs. In particular, the small business sector saw a sharp decline of 120,000 jobs.

This outcome appears to have heightened expectations for an interest rate cut and stimulated buying sentiment. Scott Welch, Chief Investment Officer (CIO) at Certuity, stated, "What people are focusing on is the job market," adding, "There is a high possibility that the benchmark interest rate will be lowered next week."

The U.S. service sector in November continued its expansion, improving from the previous month. The Institute for Supply Management (ISM) announced that the final reading of the November Services Purchasing Managers' Index (PMI) was 52.6. This is an increase of 0.2 points from October's 52.4 and slightly above the market forecast of 52.1.

According to the CME FedWatch Tool, the federal funds futures market reflected an 89.1% probability that the benchmark interest rate would be cut by 25 basis points (1bp = 0.01 percentage point) in December. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) fell by 0.51 points (3.07%) from the previous session to 16.08.