[New York Market Briefing] Expectations for rate cuts rise after private employment 'shock'…Three major indices finish higher

Major indices on the New York market closed higher. Expectations for a U.S. policy rate cut increased after private employment data fell well short of forecasts. However, a report that Microsoft (MS) lowered its AI sales targets dented investor sentiment.

On the 3rd (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 408.44 points (0.86%) to 47,882.90, the S&P 500 index gained 20.35 points (0.30%) to 6,849.72, and the Nasdaq Composite Index climbed 40.42 points (0.17%) to 23,454.09.

Weak U.S. private employment data stoked expectations of a Fed rate cut. According to the ADP National Employment Report, private payrolls in November decreased by 32,000 from the previous month. The market had expected an increase of 10,000, making this a substantial 'shock.'

In particular, payrolls at small businesses plunged by as many as 120,000, clearly showing a downturn centered on small merchants and retail.

Earlier, the U.S. Fed emphasized that it would focus on employment in its monetary policy decisions.

As expectations for rate cuts grew, buying flowed into retail, financials, and industrial sectors.

The Russell 2000 index, which is weighted toward small- and mid-cap companies, also surged 1.91%.

However, sentiment toward tech stocks did not improve much. U.S. IT outlet The Information reported that MS lowered sales growth targets for some AI agent products and reduced sales reps' quotas. As sales targets for those products were not being met, this year's targets were reportedly cut in half.

MS denied The Information's report, saying, "We have not reduced sales reps' quotas or targets."

MS's rebuttal did little to revive sentiment for tech stocks. On the day, Nvidia, Apple, and Amazon each fell around 1%. MS fell 2.5%.

By sector, all sectors except utilities and technology rose.

Financials and energy climbed more than 1%.

Salesforce's adjusted third-quarter earnings per share (EPS), announced after the close, beat expectations, and its stock is trading more than 5% higher in after-hours trading.

The Philadelphia Semiconductor Index jumped 1.83%, extending a two-day surge.

The U.S. services sector in November improved from the previous month and remained in expansion. The Institute for Supply Management (ISM) said the final November services Purchasing Managers' Index (PMI) was 52.6, up 0.2 points from October's 52.4 and slightly above the market estimate of 52.1.

According to the Chicago Mercantile Exchange (CME) FedWatch tool, federal funds futures priced in an 89.1% probability of a 25bp rate cut in December.

The Chicago Board Options Exchange (CBOE) volatility index (VIX) fell 0.51 points (3.07%) from the previous session to 16.08.

Han Kyung-woo, Hankyung.com reporter case@hankyung.com