New York Stock Exchange mixed amid unexpected job losses concerns

Korea Economic Daily

Summary

Despite concerns over a slowdown in the US labor market, growing rate-cut expectations led to a mixed trend in the New York Stock Exchange.
The ADP report confirmed a decrease in private sector jobs, raising prospects of a rate cut by the Federal Reserve System (Fed) later this year.
Tesla, Inc. rebounded following a decrease in Q2 vehicle deliveries, while NVIDIA Corporation rose and Microsoft Corporation's announcement of large-scale layoffs drew attention.

Hopes for a July rate cut rise amid economic slowdown concerns

Tesla rises despite drop in Q2 vehicle deliveries

Concerns over a slowdown in the US labor market were highlighted on the 2nd (local time), causing US stocks to open lower. However, as expectations for a rate cut intensified, the market ended mixed.

At 10:20 AM Eastern Standard Time, the S&P 500 was up 0.15%, the NASDAQ Composite Index had gained 0.57%, and the Dow Jones Industrial Average (DJIA) was down 0.2%.

As Donald Trump's tax and spending package (OBBB) passed the Senate and was sent back to the House, renewed concerns about fiscal deficits emerged alongside a plunge in the United Kingdom (UK) stock market. As a result, the yield on 10-year Treasury bonds rose 5 basis points (1bp=0.01%) to 4.29%. The yield on 2-year Treasuries, which are sensitive to monetary policy, showed little change.

According to the latest ADP report, 33,000 jobs were lost in the private sector last month. This marks the first decline in two years since March 2023. US economists had expected employment to increase by 100,000 jobs.

This report rekindled worries that the US-China tariff war could slow both the United States (US) and global economic growth.

The market now expects that, due to a cooling job market, the Federal Reserve System (Fed) may cut rates at the end of this month and is likely to cut three times this year. According to CME Group's FedWatch Tool, the probability of a rate cut at the Fed's July meeting rose to about 23%, up from 20% a day earlier.

Despite the signs of an economic downturn, Jerome Powell, Chair of the Federal Reserve System (Fed), has repeatedly emphasized that the job market remains solid.

Chris Zaccarelli of Northlight Asset Management said, "One of the reasons the Fed has been able to remain patient before cutting rates is that the job market has been resilient. But if the labor market deteriorates, the Fed will have no choice but to cut rates earlier than expected."

Despite a 13% year-over-year drop in Q2 vehicle deliveries, Tesla, Inc. rebounded 3.6% to $311 on relief that the results weren't as bad as anticipated after the previous day's decline. NVIDIA Corporation rose 1.4% to $155, while Microsoft Corporation edged lower after announcing layoffs of about 9,000 employees, nearly 4% of its global workforce.

Junga Kim, contributing reporter kja@hankyung.com