U.S. Stocks Mixed, Nasdaq Hits New High; Gold Reaches One-Month Peak
**Major stock indices diverge, with the Dow Jones falling by less than 0.1%;
**Long-term U.S. Treasury yields retreat, with the 2-year note losing the 4.70% threshold;
**ISM June non-manufacturing index falls below the boom-or-bust line.
U.S. stocks experienced mixed movements on Wednesday, with weak economic data boosting hopes that the Federal Reserve will begin easing policy in September. By the close, the Dow Jones fell 23.85 points, or 0.06%, to 39,308.00, the Nasdaq rose 0.88% to 18,188.30, and the S&P 500 index gained 0.51% to 5,537.02.
Market Overview
Due to the Independence Day holiday on Thursday, a number of economic data were released in a concentrated manner. The ADP employment report showed that private-sector jobs increased by 150,000 in June, marking the lowest level in nearly five months. Labor Department data indicated that the number of initial claims for unemployment benefits, seasonally adjusted, rose by 4,000 to 238,000 for the week ending June 29th. Continuing claims for unemployment benefits reached 1.858 million, the highest level since late November 2021.
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Both the ADP employment report and weekly unemployment benefit claims data suggest a softening in labor market conditions, which is a welcome signal ahead of Friday's highly anticipated non-farm employment report. The market hopes that signs of a weaker labor market will increase the chances of the Federal Reserve lowering interest rates.
Trade Nation Senior Market Analyst David Morrison stated: "This is a fairly strong number of unemployment claims, in line with the overall trend, which may indicate a relaxation in the job market, which must be well-received by the Federal Reserve."
Other data also showed signs of an economic cooldown. The U.S. Census Bureau of the Department of Commerce reported that U.S. factory orders fell by 0.5% in May after a 0.4% increase in April. The manufacturing sector, which accounts for 10.3% of the U.S. economy, is facing pressures from high interest rates and weak demand for goods, with business spending on equipment weaker than expected.
Meanwhile, the Institute for Supply Management (ISM) non-manufacturing index unexpectedly dropped to 48.8, falling below the boom-or-bust line of 50 for the second time in three months. ISM Non-Manufacturing Business Survey Committee Chair Steve Miller said: "The decline in the index is due to a significant reduction in business activity, the second contraction in new orders since May 2020, and continued low employment. Respondents reported that overall business is flat or lower."Due to a decline in exports, the United States' trade deficit widened for the second consecutive month in May, indicating that trade may still be a drag on economic growth in the second quarter. Data showed that the trade deficit increased by 0.8% to $75.1 billion. Among them, the goods trade deficit expanded by 0.9% to $100.2 billion, the highest since May 2022.
Long-term U.S. Treasury yields fell, with the closely rate-expectation-linked 2-year U.S. Treasury note falling 4.6 basis points to 4.691%, and the benchmark 10-year U.S. Treasury note fell 8.9 basis points to 4.347%, marking the largest drop in three weeks. Federal funds rate futures indicated that the probability of a rate cut in September has once again risen to nearly 70%.
The Federal Reserve released the minutes of the June meeting, and although inflation has retreated, policymakers are not yet ready to open the door for rate cuts. Most participants indicated that they believe the current policy stance is restrictive and therefore may further curb the economy and inflation.
Pantheon Macroeconomics Chief Economist Ian Shepherdson wrote that the Fed is still not in a hurry to start easing policy, but if job growth declines as he expects, the Fed will act faster than many expect by the end of this year.
Nationwide Investment Research Director Mark Hackett believes that bulls are still fully in control. The political uncertainty in the United States is also not enough to cause market weakness or volatility. "Most pessimists have surrendered, and at the same time, seasonal factors and fund flows provide favorable conditions. Although clouds are forming in the macroeconomic outlook, especially consumer data, investors' optimistic attitude continues to push the market higher."
In terms of individual stocks, Tesla rose 6.5%, with second-quarter deliveries announced on Tuesday stronger than expected. Bank of America Securities raised its target price for Tesla from $220 to $260 while maintaining a buy rating.
Nvidia rose 4.6%, leading the Philadelphia Semiconductor Index up 1.9%, with TSMC and Broadcom leading the gains.
Paramount's stock soared 6.9%, as National Amusements reached a preliminary agreement to sell its controlling stake in Paramount Global to Skydance Media.
International oil prices fluctuated higher, with the near-month contract for WTI crude oil rising 1.29% to $83.88 a barrel, and the near-month contract for Brent crude oil rising 1.28% to $87.34 a barrel.
Expectations of rate cuts boosted international gold prices to a one-month high, with the COMEX gold futures contract for delivery in July on the New York Commodity Exchange rising 1.58% to $2,359.80 an ounce.