Dow Hits Record, Nasdaq Pressured by Chip Selloff
US stock markets traded mixed on Thursday (July 2nd) after a sharp slowdown in the US labor market fueled speculation that the Federal Reserve would be in no hurry to raise interest rates anytime soon.
The Dow Jones Industrial Average rose 1.1% and hit an all-time high. However, the S&P 500 closed virtually unchanged, while the Nasdaq 100 fell 1.6% due to significant pressure on semiconductor stocks.
Labor data was the main market catalyst. US Nonfarm Payrolls added only 57,000 jobs in June, well below expectations. Furthermore, downward revisions for the previous two months dampened optimism about the job creation momentum that had appeared strong at the start of the year.
Despite the weak payroll data, the unemployment rate actually fell to 4.2%. However, the market still viewed the report as a signal that the US labor force is losing steam. This has led investors to cut expectations for a Fed rate hike in the coming months.
Short-term Treasury yields fell after the data was released, while the US dollar weakened against all major developed currency pairs. A weaker dollar and falling yields are typically positive for risk assets, as they alleviate pressure from high funding costs.
Fed Chairman Kevin Warsh previously said price risks had eased, but he reiterated the central bank's commitment to bringing inflation back to its 2% target. Although the Fed held interest rates unchanged last month, some officials still left open the possibility of a rate hike this year as inflation is running at its fastest pace since 2023.
However, the market rally was uneven. Volatility in technology stocks returned to the forefront ahead of the long US holiday. The leading semiconductor index extended its two-day decline to around 11%, as investors grew concerned about high valuations and massive spending on artificial intelligence infrastructure.
A selloff in chip stocks weighed on the Nasdaq, although the majority of stocks in the S&P 500 actually rose. This suggests a sector rotation is underway, with investors starting to look for opportunities outside the AI stocks that previously led the market rally.
Overall, the weak jobs data helped ease interest rate pressure and lifted most Wall Street stocks. However, the pressure on chip stocks suggests the market is becoming more selective about the technology sector after a strong rally throughout the first half.
Going forward, investors will be closely monitoring further comments from Fed officials, US inflation data, and corporate earnings developments. If economic data continues to weaken without triggering recession fears, stocks could potentially benefit from expectations of lower interest rates. However, if the chip selloff continues, the Nasdaq still risks lagging behind the Dow and other sectors. (arl)
Source: Newsmaker.id
