Weakening US labor market gives share prices a boost
Wall Street has rallied, building on the already significant price gains of the current week. The stock markets continued to be supported by a sharp fall in market interest rates in the wake of the labor market data. Among individual stocks, Apple shares fell slightly following the quarterly figures. The technology sector in the S&P 500 bucked the positive trend, losing 0.1%.
In recent days, significantly lower market interest rates following dovish comments by US Federal Reserve Chairman Jerome Powell had boosted the stock market. The market is largely assuming that the Fed will not raise interest rates again in the current cycle, although the central bank has kept this option open.
This expectation was supported by the US labor market report for October. This is because job growth was lower than economists had expected. The private and public sectors added 150,000 jobs, while economists surveyed by Dow Jones Newswires had expected an increase of 170,000. On the one hand, this calls for caution with regard to the economy; on the other hand, it is likely to have a dampening effect on inflation.
The Dow Jones index rose by 0.7 percent to 34,061 points. The S&P 500 rose by 0.9 percent. The Nasdaq Composite gained 1.4 percent. On the Nyse, 2438 (Thursday: 2583) share price gainers were offset by 468 (328) losers. A total of 39 (44) stocks closed unchanged.
Business activity in the US services sector was somewhat brisker in October than in the previous month. The S&P Global Purchasing Managers' Index for the sector rose to 50.6 from 50.1 points. However, economists had predicted a reading of 50.9. The ISM index for the service sector fell from 53.6 in September to 51.8 in October. Economists had only forecast a fall to 53.0.
Yields fall sharply - dollar at five-week low
On the bond market, yields continued to fall sharply after the labor market data - by 14.1 basis points to 4.52 percent in the ten-year segment. The turnaround on the bond market was triggered by the view that the weakening of the US economy will put an end to interest rate hikes by the US Federal Reserve and high inflation, according to reports. The yield on 30-year paper recorded its biggest weekly loss since March 2020.
The dollar fell to its lowest level in five weeks following the somewhat weaker-than-expected US labor market report. Further declines in US bond yields pushed the dollar index down another 1.0%. The data underpins the prevailing market view that interest rates in the US have peaked and that no further rate hikes are on the cards.
The gold price benefited from falling market interest rates and the weak dollar. The price of a troy ounce rose by 0.4 percent to 1993 dollars, briefly exceeding the 2000 dollar mark. "Everything speaks for gold," said one market participant, referring to the moderate US labor market report, the declining ISM index and the geopolitical risks.
Oil prices fell. Brent and WTI prices both lost 1.8 percent. Prices marked the second weekly decline in a row after fears of an expansion of the Israel-Hamas war eased and investors returned their focus to demand prospects, it was reported. In addition, positions were reduced before the weekend.
Apple in the red due to decline in sales
Apple fell by 0.5 percent. The iPhone manufacturer also reported a decline in sales for its fourth financial quarter, even though sales were still higher than analysts had expected. The Chinese business shrank surprisingly significantly. Apple's CFO Luca Maestri hinted that Apple will continue to struggle with the weak economy in China and competition from Chinese providers.
Expedia rose by 18.8 percent. The travel platform presented surprisingly good figures and reported unbroken high demand. The shares of the hotel booking platform Booking Holdings improved by 0.7 percent after initial losses. Although the company reported a record quarter, the share price has already risen by more than 40 percent since the beginning of the year.
Starbucks (+2.6%) plans to expand the number of its stores worldwide to 55,000 by 2030. The coffee chain currently operates a good 38,000. New store formats are to be launched in the USA that focus on pick-up and drive-through.
In the context of the weakening US labor market impact on share prices, investors and companies on Wall Street are closely watching the performance of key indices such as the Dow Jones. The Dow Jones index, which represents a selection of 30 significant stocks, saw a 0.7% increase following the labor market report, indicating a positive sentiment among investors despite the lower-than-expected job growth.
Furthermore, companies listed on the New York Stock Exchange (NYSE) saw a shift in fortunes, with 2438 gainers offset by 468 losers, suggesting a mixed market reaction to the labor market data. This goes to show that while the weakening US labor market might boost share prices for some, it could also present challenges for others, highlighting the importance of analyzing market trends for both investors and companies on Wall Street.
Source: www.ntv.de
