US stock markets closed mixed in early trading hours Beijing time on Thursday, July 3. The Dow Jones Industrial Average reached a new record high, while a decline in chip stocks dragged the Nasdaq lower. A weaker-than-expected US June non-farm payrolls report led markets to believe the Federal Reserve will pause its interest rate hikes.
The Dow Jones Industrial Average gained 594.18 points, or 1.14%, to close at 52,899.42. The Nasdaq Composite fell 207.36 points, or 0.80%, to 25,832.67. The S&P 500 index edged down 0.50 points, or 0.01%, finishing at 7,482.73.
During Thursday's session, the Dow hit an intraday record high of 52,903.85 points.
US markets will be closed on Friday, July 3, in observance of the Independence Day holiday. As the official holiday (July 4) falls on a Saturday this year, the US financial markets will observe the holiday on Friday. Due to this holiday, some futures contracts on the CME Group and ICE exchanges will also close early.
For the week, the Dow gained 1.97%, the Nasdaq rose 2.12%, and the S&P 500 increased 1.76%.
The semiconductor sector declined for a second consecutive day. The VanEck Semiconductor ETF (SMH) fell 5.2%, with Teradyne and KLA leading the sector lower, both dropping over 13%. NVIDIA (NVDA) shares retreated 1.39%, while Micron Technology (MU) shares declined more than 5%.
Anshul Sharma, Chief Investment Officer at Savvy Wealth, commented: "This could be a rotation of funds away from sectors that have been hot over the past few months into other areas, but I also believe the market is re-evaluating the AI trade itself. If companies become more cost-conscious about computing, will that become their next focus area?"
The US June non-farm payrolls report, released early on Thursday, showed the economy added 57,000 jobs last month, below the 115,000 expected by economists surveyed by Dow Jones. However, the unemployment rate fell to 4.2%, whereas economists had expected it to hold steady at 4.3%.
Following the data, the yield on the 2-year Treasury note fell, as markets interpreted the situation as one where the Federal Reserve would likely hold off on further rate increases.
Federal Reserve Chair Kevin Warsh, speaking at the European Central Bank's Sintra Forum on Wednesday, stated the Fed is "charting a new path," with future monetary policy to be based on a new real-time data system, moving away from reliance on official statistical reports which have lags and biases.
"My vision is that within 9 to 12 months, we will use new technology to track the real economy in real time, allowing central bank decisions to be based on synchronous, immediate data, leading to more precise policy judgments," Warsh said. He established five specialized working groups last month, one specifically tasked with finding new data sources and methods, with the member list to be announced next week.
On the issue of inflation, Warsh's remarks carried a nuanced, dual tone. He explicitly acknowledged that "price levels are too high" and reiterated the Fed's commitment to its 2% inflation target, stating that anyone who thinks the Fed would be satisfied with inflation above 2% would be "disappointed." Simultaneously, however, he noted that inflation expectations and inflation risks have declined over the past four weeks.
Warsh also expressed new thinking on the method of assessing inflation itself. He has long favored the Dallas Fed's "trimmed mean" inflation measure, which shows an inflation rate (around 2.4%) significantly lower than the official CPI (4.2%) and PCE (4.1%). His reforms imply the Fed may incorporate a more diverse set of inflation indicators into its decision-making framework.
Furthermore, Warsh again emphasized the Fed's policy independence and reiterated that it would not provide forward guidance on interest rates, with policy decisions to be entirely data-dependent.
Comments