Rebound after 'employment shock'...Rising expectations for rate cuts [New York Stock Market Briefing]

Major U.S. indices, which plummeted due to an 'employment shock,' rebounded in just one day. This is interpreted as growing expectations for a rate cut.

On the 4th (local time), the Dow Jones Industrial Average (DJIA) closed at 44,173.64, up 585.06 points (1.34%) from the previous session. The S&P 500 index rose 91.93 points (1.47%) to close at 6,329.94, while the NASDAQ jumped 403.45 points (1.95%) to end at 21,053.58.

On the 1st, all major indices dropped simultaneously. This was due to employment data falling short of expectations, intensifying concerns about a recession. According to the United States Department of Labor, employment (excluding agriculture) for July increased by only 73,000 compared to the previous month, below the market expectation of a 100,000 increase. In addition, jobs added in May were revised from 144,000 to 19,000, and those in June from 147,000 to 14,000.

However, expectations that worsening employment data could speed up a rate cut led to bargain buying and a rebound in the indices. Recently, Adriana Kugler, previously categorized as a hawk (favoring monetary tightening), resigned early on the 1st. President Donald Trump can now appoint a new board member. Once appointed, 3 of the total 7 board members will have been appointed by President Donald Trump.

According to CME FedWatch at the Chicago Mercantile Exchange (CME), the interest rate futures market reflected a 96% probability that the Fed will lower the FOMC benchmark rate by 0.25% points from the current annual 4.25-4.50% at its meeting in September.

Driven by expectations of a rate cut, tech stocks strengthened. NVIDIA (3.62%), Meta Platforms (3.51%), Microsoft (2.19%), and Alphabet Inc. (3.12%) all rose by more than 3%. Tesla, Inc. climbed by 2.17%. On the same day, Tesla, Inc. approved a compensation plan to grant CEO Elon Musk newly issued shares worth $29 billion (about ₩40 trillion).

However, Amazon.com, Inc. continued to weaken from the previous session due to concerns over its cloud business. The cloud division accounts for a small portion of Amazon.com's total revenue but is a key profit source, responsible for about 60% of its total operating profit.

Berkshire Hathaway, which announced its earnings on the 2nd, fell 2.9% after it was confirmed not to have conducted any share repurchases in the second quarter.

Mike Dickson, Head of Research and Quant Strategies at Horizon Investments, said, "There was some bargain hunting today," and added, "Although concerns about the labor market have surfaced, stronger expectations for a rate cut are offsetting this."

Jin Young-gi, Hankyung.com Reporter young71@hankyung.com