On Tuesday morning, US stock futures were slightly negative: Dow Jones and S&P futures were down 0.19%, while Nasdaq 100 futures declined by 0.12%. US stock markets were closed Monday for Labor Day, but other exchanges worldwide remained open. European markets closed nearly flat, while in China, disappointing service PMI data led to a decline in Asian markets on September 5. While the Nikkei recorded a modest gain, the Hang Seng lost 1.5%, Shanghai dropped 0.65%, and Wall Street futures are slightly down, awaiting factory order data in the afternoon. Despite Beijing’s new easing measures to support the real estate and consumption sectors, investors believe they are insufficient, increasing caution and leading to the sale of riskier assets.
Last week saw a strong rally in the stock market despite a brief mid-week pause. Market gains were fueled by declining Treasury bond yields for most of the week, although yields rose again on Friday. This confirmed a bullish market trend, with significant stocks performing well.
US employment data presents apparent contradictions, creating a complex picture. In August, the number of employed individuals increased to 187,000, surpassing expectations of 170,000 and July’s figure of 157,000. However, the unemployment rate unexpectedly rose to 3.8%, exceeding the expected 3.5% and the previous month’s rate. This apparent contradiction can be explained by considering that the unemployment rate measures the percentage of people actively seeking employment. It’s possible that the number of actively job-seeking individuals decreased, even though there are still unemployed individuals.
It should also be noted that the August manufacturing PMI exceeded expectations, recording 47.9 points compared to the expected 47 points, though lower than July’s 49 points. This may indicate that while some economic indicators in the US show signs of slowing down, the labor market remains robust. The labor market is often the last to react to economic changes, so it remains essential to closely monitor these dynamics for a complete understanding of the financial situation.
Meanwhile, following the announcement, the CME Group’s FedWatch interest rate monitoring tool reflected a 93% probability that the Federal Reserve will keep interest rates at current levels during the upcoming end-of-month policy meeting.
In the meantime, investors have conducted an in-depth analysis of new corporate earnings reports. Companies like database software producer MongoDB and Dell Technologies recorded significant increases, up 3% and 21%, respectively, thanks to quarterly results that exceeded analysts’ expectations. Also noteworthy is the performance of sportswear company Lululemon Athletica, whose stock saw a 6% increase after surpassing Wall Street’s forecasts.
These positive developments in earnings reports bolster investor confidence in financial markets, suggesting that many companies are overcoming recent economic challenges and continuing to thrive.
Naoki Tamura, a member of the board of directors of the Bank of Japan, stated that the possibility of ending ultra-accommodative policies could be considered by early 2024, as inflation has remained above the reference target for nearly a year. This outlook has generated positive momentum for the yen, trading near nine-month lows. This trend is attributed to the increasing gap between local and US interest rates. The Bank of Japan is leaning towards policy revisions due to sustained inflation, impacting the foreign exchange market and the dynamics between the two currencies. The potential end of accommodative measures could have significant consequences for the Japanese economy and international financial markets.
Market Closing Numbers on Friday, September 1, 2023
Dow Jones +0.33% at 34,837.71
S&P 500 +0.18% at 4,515.77
NASDAQ Composite -0.022% at 14,031.81