[New York Stock Market] Recession Concerns Spread Amid Employment Slowdown... Nasdaq Down 1.07%

The three major indices of the U.S. New York stock market closed mixed on the 5th (local time) as additional indicators suggesting a slowdown in the labor market were released. Amid renewed concerns about economic slowdown, an employment report that could impact the Federal Reserve's (Fed) interest rate policy path will be released later this week.

At the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,482.72, up 80.34 points (0.24%) from the previous session. The S&P 500, which focuses on large-cap stocks, fell 10.22 points (0.25%) to 4,090.38, while the tech-heavy Nasdaq dropped 129.46 points (1.07%) to 11,996.86.

Angelo Koukapas, investment strategist at Edward Jones, said, "The course is still unclear," but added, "It is doubtful whether the market can overcome the potential economic slowdown and growth concerns seen over the past two days."

Within the S&P 500, technology, consumer discretionary, and industrial sectors declined, while utilities, healthcare, and energy sectors showed gains. Pharmaceutical company Johnson & Johnson rose 4.49% from the previous session after announcing it would pay $8.9 billion over the next 25 years related to cancer allegations concerning its products. FedEx rose more than 1.5% after increasing its quarterly dividend. Major tech stocks such as Tesla (-3.67%), Amazon (-2.74%), and Apple (-1.13%) also slipped. Concerns over U.S.-China tensions grew following a meeting between Kevin McCarthy, the third-ranking U.S. official and Speaker of the House, and Taiwan's President Tsai Ing-wen, leading to declines in Chinese-related stocks such as Alibaba (-2.15%), Tencent Music (-3.80%), and Nio (-2.71%).

[Image source=Reuters Yonhap News]

Investors are examining future economic prospects and the Fed's monetary policy path based on key economic indicators. On this day, Automatic Data Processing (ADP) reported that private sector employment increased by 145,000 jobs in March, which is more than 100,000 fewer than the previous month's increase and well below the market forecast of 210,000. This has led to assessments that the Fed's tightening effects since last year are resulting in a slowdown in the labor market. Earlier, the February Job Openings and Labor Turnover Survey (JOLTs) showed that job openings fell to 9.931 million in February, dropping below 10 million for the first time since May 2021.

Nela Richardson, ADP's chief economist, said, "Our March jobs data is one of many signals showing the economy is slowing," adding, "Employers are stepping back from the strong hiring and wage growth seen over the past year." Wage growth has also somewhat eased, with wages for workers who did not change jobs rising by a minimum of 6.9% year-over-year for the first time in about a year. Now, investors' attention is focused on the March employment report to be released on the 7th. Wall Street estimates that nonfarm payrolls for March will be around 240,000, reflecting a potential further decline from February's 311,000.

With additional indicators suggesting a labor market slowdown, the market slightly favors a rate hold in May. According to the Chicago Mercantile Exchange (CME) FedWatch tool, as of the morning of this day, federal funds futures markets are pricing in nearly a 55% chance that the Fed will hold rates steady at the May FOMC meeting. The probability of a 0.25 percentage point rate hike is 45.2% as of the previous day.

The indicators released on this day further heightened concerns about economic slowdown. According to the U.S. Department of Commerce, the trade deficit in goods and services for February was $70.5 billion (approximately 92.5 trillion KRW), up 2.7% from the previous month. This exceeded expert forecasts compiled by Dow Jones and others. Demand for both goods and services declined simultaneously, with imports down 1.5% and exports down 2.7%.

In particular, the widening U.S. trade deficit has led to analyses suggesting that the first-quarter economic growth rate could weaken more than initially expected. Typically, an expanding trade deficit is interpreted as a signal of economic slowdown. According to the GDPNow model by the Federal Reserve Bank of Atlanta, the first-quarter growth forecast as of the previous day was 1.7% annualized, sharply revised down from 3.5% two weeks earlier.

On the same day, the World Trade Organization (WTO) reported in a report that global merchandise trade growth is expected to be only 1.7% this year due to the Ukraine war, inflation, interest rate hikes by various countries, and financial market uncertainties. Last year's trade growth rate was 2.7%.

In the New York bond market on this day, U.S. Treasury yields fell as the weaker-than-expected economic data was absorbed. The 10-year Treasury yield dropped to around 3.30%, and the 2-year Treasury yield, which is sensitive to monetary policy, fell to about 3.79%. The dollar index, which measures the value of the U.S. dollar against six major currencies, rose 0.3% from the previous session, approaching the 102 level.

Due to concerns about economic slowdown, international oil prices fell for the first time in five trading days. At the New York Mercantile Exchange, the price of West Texas Intermediate (WTI) crude oil for May delivery closed at $80.61 per barrel, down 0.12% from the previous session.

This content was produced with the assistance of AI translation services.