The DOW JONES fell 0.73% to 34,037 points, while the S&P 500 fell 0.88% to 4,407 points. The NASDAQ 100 fell 1.01% to 13,652 points.
The major New York indices are coming out of a down phase. The shortened trading week resumed on Wednesday after a pause on July 4, with major indices posting slight losses. The Dow Jones lost 129.83 points, or 0.38%, while the S&P 500 lost 0.2%. Both indices broke their three-day winning streak. The Nasdaq closed down 0.18%.
Investors are still pondering the minutes of the Federal Reserve’s June monetary policy meeting, at which members opted to leave interest rates on hold, breaking an unbroken string of rate hikes since March last year. However, discussions reported yesterday indicated that most Fed officials will support further rate hikes in the future.
In fact, operators value a The probability of a rate hike at this month’s central bank meeting is almost 89%according to CME Group’s FedWatch tool.
“Fed Chairman Powell has made it clear that he has every confidence that this 2% target will be met. I think that means it’s a ‘when’ not a ‘if’ of further increases later this year.” CIC Wealth’s Malcolm Ethridge told CNBC. The expert expects two more interest rate hikes by the Fed this year, probably in the third quarter.
“It’s very difficult for the Federal Reserve to change direction anytime soon,” Sue Trinh, co-head of global macro strategy at Manulife Investment Management, told Bloomberg Television. “There have been previous turning points, with core inflation hovering around half of current levels, suggesting further tightening is imminent.” “We’re a bit more defensive in the short-term,” he warns.
On Friday’s macro agenda, investors breakfasted today with new signs that the US jobs market is still not slowing down and that companies are creating much more jobs than expected. According to the ADP report, private sector jobs rose 497k for the month, well above the revised down gain of 267k in May and well above the Dow Jones consensus estimate of 220k.. It’s also the highest monthly gain since July 2022.
Annual compensation rose 6.4%, representing an ongoing slowdown but still indicative of the inflationary pressures the world’s largest economy is facing.
“Consumer-facing service industries had a strong June and should boost job creation more than expected,” said ADP chief economist Nela Richardson. “But wage growth continues to slow in the same industries and hiring should peak after a late-cycle pick-up.”
On the other hand, Initial jobless claims rose 12,000 to 248,000 for the week ended July 1. It’s slightly above the 245,000 forecast by analysts. Both the weekly numbers and the ADP report serve as a prelude to the June jobs report to be released by the Labor Department tomorrow.
Meanwhile, US Treasury Secretary Janet Yellen lands in Beijing to try to further improve ties between the world’s two largest economies.
On the business front, eyes are turning to the airline sector after JetBlue Airways announced it was ending its alliance with American Airlines in the Northeast US.
The airline said Wednesday afternoon it would not appeal a US judge’s decision earlier this year that ordered the company to end its partnership after the deal was found to be anticompetitive. “Despite our deep belief in the pro-competitive benefits of the NEA, JetBlue has made the difficult decision, after careful consideration, not to appeal the court’s decision that the NEA cannot proceed as currently written,” JetBlue said in a statement adding that it plans to focus on acquiring Spirit Airlines.
Meanwhile, American Airlines has indicated that it still plans to appeal the verdict. JetBlue and American Airlines shares are down at the market open, while Spirit Airlines has responded to the news with gains.
In the financial sector, Bank of America has announced this will increase its quarterly dividend from 22 to 24 cents per share. The roughly 9% increase puts the bank’s dividend yield at about 3.3% based on Wednesday’s close. The rise comes days after Bank of America said it was discussing with the Federal Reserve differences in results between the central bank’s stress test and an internal version of the test.
As far as analyst recommendations go, there’s good news for Microsoft. Morgan Stanley has raised the tech giant’s target price, stating that artificial intelligence could push the company’s market value to over $3 trillion, a level previously only reached by Apple.
Investors need to keep an eye on the price of Meta (Facebook) after the company officially launched Threads, its Twitter-like messaging application, yesterday. The Threads app is now available to download for free on the Apple App Store and Google Play in more than 100 countries, Meta said. Threads shares the visual aesthetic of Twitter as a text-based social messaging app where users can post short messages for others to like, share and comment on, as evidenced by Threads screenshots available on the Manzana App Store.
People will be able to follow the same Threads accounts they follow on Instagram and respond to other public posts in a similar way that people use Twitter. Zuckerberg said Threads surpassed 5 million registrations in the first four hours..
Meanwhile, commodity markets saw slight declines in oil prices, with the barrel in West Texas in the US falling 0.12% to $72. Europe’s benchmark Brent falls 0.16% and is being paid at $76.76 a barrel.
In fixed income, bond yields rose sharply today after jobs data. Ten-year bond yield rises eight points to 4.025%while the two-year bond’s rise is even more pronounced, from 12 points to a yield of 5.08%.
The euro rose 0.09% against the dollar to an exchange rate of 1.0867 dollars per common currency. Gold is up 0.27% and is being paid at $1,922 an ounce.