"Firm rate cut" expected… Nasdaq up 0.7% New York stocks rebound

Treasury yields and the dollar fall, spot gold rises

Some market participants also mention the possibility of a big cut in September

U.S. stocks, which had closed lower last Friday after extremely weak U.S. employment data, opened higher on the 8th (local time) as rate cut expectations increased.

At 10 a.m. EST, the S&P500 was up 0.2%, the Nasdaq Composite was up 0.7%. The Dow Jones Industrial Average was down 0.1%.

The 10-year U.S. Treasury yield was trading at 4.057%, down 2.9 basis points from the previous trading day (1bp=0.01%). The 30-year long-term Treasury yield, which neared 5% last week, also fell 5bp to 4.724%. The two-year Treasury yield, which already prices in rate cuts, stood at 3.488%, down 1.9bp, remaining at its lowest level since 2022.

The Bloomberg Dollar Spot Index fell 0.3%, and spot gold traded at 3,625.11 dollars per ounce, up 1.1%.

Bitcoin reached 112,226.95 dollars in the U.S. market, up 0.8%, while Ether was up 1% at 4,344.42 dollars.

Wall Street views the Federal Reserve's rate cut next week as certain, with some raising the possibility of a 0.5% "big cut", or increasing this year's initially projected 1-2 cuts to as many as 3 cuts.

Chris Lakin of Morgan Stanley's E*TRADE warned, "As rate cuts are increasingly priced into market expectations, the market may find it difficult to ignore additional signs of an economic slowdown in the short term."

This week, August Producer Price Index (PPI) will be released first on the 10th, and the Consumer Price Index (CPI) will be released on Thursday the 11th.

According to economists' estimates compiled by Dow Jones and Bloomberg, core CPI for August, which measures inflation excluding food and fuel, is expected to have risen 0.3% for the second consecutive month following July, and to have recorded an annual rate of 3.1%.

On the 9th, revised employment figures from the U.S. Bureau of Labor Statistics will be released.

Economists at Wells Fargo, Comerica Bank, and Pantheon Macroeconomics expect that the preliminary benchmark revisions the Bureau of Labor Statistics will release will show March employment figures to be nearly 800,000 lower than current estimates, i.e., an average monthly decrease of about 67,000. Nomura Securities, Bank of America, and the Royal Bank of Canada analyzed that the downward revision could be close to 1 million.

According to data analyzed by Nathaniel Wellhofer of Bloomberg Intelligence, the S&P500 has on average declined 1% every September since 1971. However, in periods when the U.S. Fed cut rates and the economy did not contract, September saw an average 1.2% rise. Last September, when the Fed cut rates by 0.5%, the S7P500 rose 2%.

Goldman Sachs Group expects the U.S. stock market's upswing to broaden as relatively underperforming stocks, such as small caps, rise amid continued resilience in the U.S. economic outlook.

Michael Wilson of Morgan Stanley also emphasized that, even if volatility increases in the short term, the U.S. economy is transitioning into the so-called "early cycle" phase, which will support a sustained and broad-based recovery in corporate earnings.

S&P Dow Jones Indices announced that from the 22nd of this month, Robinhood Markets, AppLovin, and Emcor Group will be newly added to the S&P500 and begin trading. The three companies being removed are MarketAxess Holdings, Caesars Entertainment, and Enphase Energy.

Kim Jeong-a, guest reporter kja@hankyung.com