Nasdaq Opens Higher at 26,047 as Weak June Jobs Report Cools Fed Rate-Hike Expectations; Dow, S&P 500 Also Gain

Mumbai, July 2: US equity markets opened higher on Thursday as a weaker-than-expected June nonfarm payrolls report tempered expectations for further interest-rate hikes by the Federal Reserve. The Nasdaq Composite (^IXIC) rose 7.4 points, or 0.03%, to 26,047.38 at the opening bell. The S&P 500 (^GSPC) gained 11.9 points, or 0.16%, to 7,495.14, while the Dow Jones Industrial Average (^DJI) advanced 90.0 points, or 0.17%, to 52,395.22.

The positive opening followed Wednesday’s session when all three major indices closed lower, with the Nasdaq shedding 173.69 points, or 0.66%, to 26,040.03, as a broad-based sell-off in semiconductor stocks offset gains in other technology shares. The Dow had touched a fresh intraday record of 52,742.66 before retreating to close marginally lower at 52,305.24 (down 13.96 points), while the S&P 500 declined 16.13 points, or 0.22%, to 7,483.23.

Chip Sector Rotation Deepens After Stellar First-Half Rally

Semiconductor stocks remained under pressure in early trading, extending Wednesday’s sharp declines. The Philadelphia Semiconductor Index had plunged 6.27% to 13,353.28 in the previous session. Micron Technology tumbled 10.30%, Intel dropped 9.00%, Lam Research fell 9.71%, and Applied Materials declined 9.93%. KLA Corporation suffered the steepest decline among major chipmakers, slumping 11.77% to 266.19.

Also Read: How to Invest in the US Stocks From India?

The sell-off was attributed to profit-taking following an extraordinary first-half performance, during which semiconductor stocks surged more than 80% on average. The rotation out of semiconductors reflects a broader pattern that has characterised the bull market, with investors moving capital from high-flying technology names into other sectors.

Palantir Technologies bucked the chip-sector weakness, rising approximately 4% in premarket trading after D.A. Davidson upgraded the AI software and defence company to “buy” from “neutral,” citing competitive advantages and an attractive valuation.

Meta Platforms Surges on Cloud Computing Ambitions

Technology stocks showed mixed performance as Meta Platforms provided a bright spot, rallying 8.81% in Wednesday’s session following reports that the social media giant is developing a cloud computing business. The initiative, internally dubbed “Meta Compute,” would allow the company to monetise its excess artificial intelligence computing capacity by selling access to third-party customers.

Microsoft gained 3.02%, while Apple advanced 1.73% , helping to stem the Nasdaq’s decline. Alphabet rose 1.09% , and Amazon added 1.43% as investors rotated into mega-cap technology names. Netflix shares climbed 3.91% , and Tesla gained 1.12%.

However, pressure on tech stocks lingered after a sharp sell-off in South Korean chipmakers helped drive a 7.9% plunge for the Kospi stock benchmark. Shares of memory makers SK Hynix and Samsung Electronics, which each recently laid out massive AI investments, sank over 14% and 9% , respectively.

June Payrolls Add Just 57,000 Jobs, Missing 115,000 Estimate

The Bureau of Labor Statistics reported that the US economy added 57,000 nonfarm payrolls in June, falling significantly short of the 115,000 jobs economists surveyed by Dow Jones had expected. The unemployment rate, however, declined to 4.2% from 4.3% in May, against forecasts that it would remain unchanged at 4.3%.

May’s job gains were revised downward to 129,000 from the initially reported 172,000, while April’s tally was also revised lower to 148,000 from 179,000. The leisure and hospitality sector lost 61,000 jobs in June—a sharp reversal from May when the sector led additions with 70,000 jobs. Professional and business services added 36,000 jobs, social assistance contributed 25,000, and healthcare employment continued its upward trajectory, tacking on 22,000 positions.

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The cooler jobs reading broke a three-month streak of stronger-than-expected gains and marked the lowest job creation in four months. Private sector hiring slowed significantly to 49,000 jobs added in June, down from May’s revised gain of 97,000, against economist expectations of 107,000.

Treasury Yields Fall as Rate-Hike Odds Moderate

The two-year Treasury yield declined sharply following the jobs data, as traders reassessed the likelihood of near-term monetary policy tightening. Fed funds futures contracts reflected less than a 20% chance of a rate hike in July, though a September increase remained priced at about 60% probability. This marked a notable shift from Wednesday, when traders assigned roughly 84% odds that rates would end the year higher.

The 10-year Treasury yield, which had climbed above 4.50% in recent sessions amid inflation concerns stemming from the Iran conflict, fell back to approximately 4.47% following the employment data release. Yields had been on an upward trajectory since the war with Iran began, driven by worries over persistent inflation from elevated oil prices.

Oil Prices Slide to Four-Month Low on US-Iran Talks Progress

Crude oil prices extended losses for a third straight session, with Brent crude futures declining approximately 1.1% to $70.82 per barrel and US West Texas Intermediate trading around $67.88. Both benchmarks touched their lowest levels since February 27.

The decline followed signs of progress in indirect negotiations between the US and Iran concerning the Strait of Hormuz. Qatar, which has been mediating the talks, confirmed that discussions made “positive progress”. Oil supply through the critical waterway has reached more than 10 million barrels a day, underscoring Tehran’s now-limited ability to halt shipping through the Strait. The contract is on pace for its fourth consecutive weekly loss, marking the first such streak in nearly two years.

Initial Jobless Claims Fall to 215,000

Separate data from the Department of Labor showed initial jobless claims fell to 215,000 in the week ended 27 June, slightly below consensus estimates of 218,000. The previous week’s tally was revised to 216,000. The four-week moving average of initial claims declined to 222,000 from 224,500 the prior week.

Continuing claims, which track the unemployed population still seeking work, rose marginally to 1.814 million in the week ended 20 June, from the prior week’s revised count of 1.812 million, against economist expectations of 1.82 million.

Bank of America’s Subramanian: ‘Hard to Be Bearish on America’

Savita Subramanian, head of US equity and quantitative strategy at Bank of America Securities, said the US economy looks healthy and investors may need to look beyond the market’s biggest tech stocks for the next leg of gains.

“I think the index itself looks a little bit fraught in terms of just supply coming online, demand maybe kind of pausing for a moment, but I think the economy is really the bright spot, and corporate earnings are actually gangbusters this year,” Subramanian told CNBC’s “Squawk Box.”

Pointing to strong economic growth, she said, “It’s hard to be bearish on America right now.” She added that hyperscalers are providing stability when it comes to capital expenditure. Subramanian remains bullish on GDP-sensitive cyclical companies in the industrials, energy and materials sectors, which stand to benefit from the country’s GDP growth. Energy remained one of the more compelling areas, with oil companies exhibiting capital discipline and focusing on cash returns and dividends.

The June jobs report, showing a significant slowdown in hiring with only 57,000 jobs added against expectations of 115,000, has reduced pressure on the Federal Reserve to raise interest rates in the near term. Treasury yields have moderated accordingly, with the 10-year yield retreating to 4.47%. Meanwhile, ongoing rotation out of semiconductor stocks reflects profit-taking after an 80% first-half surge, while oil prices continue to decline on US-Iran negotiation progress, with Brent crude trading near $70.82 per barrel.

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Source

• https://www.nasdaq.com/

• spglobal.com/spdji/en/indices/equity/sp-500/

• https://www.dowjones.com/