- In June, the U.S. added only 57,000 non-farm jobs, far below the market expectation of 110,000, prompting traders to lower their expectations for Federal Reserve rate hikes.
- The Dow Jones Industrial Average rose over 1% on Thursday, reaching a record closing high, marking its fourth consecutive week of gains ahead of the long weekend holiday.
- The Philadelphia Semiconductor Index plummeted by 5.4%, as the chip sector faced intense profit-taking after a strong previous rally, dragging the Nasdaq Index lower.
Cooling Labor Market Reshapes Federal Reserve Policy Pricing
The latest U.S. non-farm employment report shows that job changes in June were significantly weaker than historical averages and market forecasts. Specifically, only 57,000 new jobs were recorded in June, far below the economists' consensus prediction of 110,000. The unemployment rate slightly narrowed to 4.2%, slightly below the expected 4.3%.
This data completely altered the previously established tightening expectations due to strong job growth. According to CME's FedWatch tool data, after the report's release, capital markets repriced the Federal Reserve's tightening path. The probability of the Fed announcing a rate hike at the September policy meeting was significantly reassessed from 64.1% before the report to 55%. Adam Sarhan, CEO of 50 Park Investments, commented that while this report does not signify the end of inflation concerns, it does significantly ease the marginal pressure on the Fed to continue raising rates in the short term.
Apple's New Device Effect and Semiconductor Sector High-Level Correction
Within the equity market, different sectors showed significant divergence due to differences in pricing logic. Apple Inc. surged 4.8% against the trend due to rumors of product line expansion, providing significant upward support to major stock indices. According to media reports, the consumer electronics giant plans to launch five new iPhone models in its upcoming cycle.
In stark contrast, the semiconductor sector experienced a valuation correction. The Philadelphia Semiconductor Index recorded a 5.4% decline at Thursday's close, marking its second consecutive day of significant decline. Bruce Zaro, Managing Director of Granite Wealth Management, pointed out that given the semiconductor index still holds about a 78% cumulative gain year-to-date, investors choosing to take profits before the long weekend is a typical phase position adjustment.
Tesla's Downward Trend and Light Trading Before the Holiday
The electric vehicle manufacturing sector also experienced an adjustment as positive news was fully priced in. Tesla Inc. closed down 7.5% on Thursday. Although the company's second-quarter vehicle delivery data exceeded market expectations, the stock had already accumulated a considerable weekly gain before the report's release, and profit-taking suppressed its subsequent upward momentum.
Additionally, the new stock market also faced valuation corrections, with Bending Spoons, which surged 40% on its Nasdaq debut the previous day, plunging 11.3% in Thursday's trading. As Friday coincides with the U.S. Independence Day holiday, all U.S. markets will be closed, leading to overall light trading on Thursday. The cumulative trading volume across U.S. exchanges shrank to 19.92 billion shares, significantly below the 23.34 billion shares average daily trading level of the past 20 full trading days.
