**U.S. stock indexes rebound, S&P 500 rises by 0.4%;
**Expectations for rate cuts heat up, medium to long-term U.S. Treasury yields retreat;
**U.S. Department of Labor significantly revises non-farm employment annual data downward.
U.S. stocks edged higher on Wednesday, with the Department of Labor's revision of employment data indicating a slowing labor market and the Federal Reserve's meeting minutes also signaling a rate cut in September. At the close, the Dow Jones Industrial Average rose by 55.52 points, or 0.14%, to 40,890.49, the Nasdaq Composite gained 0.57%, to 17,918.99, and the S&P 500 index increased by 0.42%, to 5,620.85.
Market Overview
A report from the U.S. Department of Labor revealed that the Bureau of Labor Statistics has revised downward the increase in non-farm employment positions by 818,000 for the period from April 2023 to March 2024. This is the most severe preliminary revision since the global financial crisis, suggesting that the labor market's weakness may be more pronounced than previously anticipated.
Jeffrey Roach, Chief Economist at LPL Financial, believes that the deterioration of the labor market will allow the Federal Reserve to emphasize the duality of its dual mandate, and investors should prepare for the Fed to be ready for a rate cut at its September meeting.
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The latest Federal Reserve minutes from the July meeting indicated that if the data evolve as expected, most officials believe a rate cut in September could be appropriate. Additionally, some policymakers considered a 25 basis point rate hike in July to be "reasonable."
Medium to long-term U.S. Treasury yields retreated, with the 2-year note, closely tied to rate expectations, falling to 3.92%, and the benchmark 10-year Treasury note dropping to 3.78%. According to the CME Group's FedWatch tool, traders are pricing in a 100% chance of a rate cut next month, with the debate centered on whether the potential magnitude will be 25 basis points or 50 basis points.
The market's focus now shifts to Friday's Jackson Hole Economic Symposium, where Federal Reserve Chairman Jerome Powell will deliver a speech. Following the latest batch of mixed economic data, the market will look for policy clues from the latest commentary. Chris Zaccarelli, Chief Investment Officer at Independence Advisor Alliance, said, "Everyone is looking ahead to the Fed's next move. I believe the market has, at least temporarily, shaken off growth fears and is re-focusing on the Fed's rate-cutting cycle."Natixis Chief Portfolio Strategist Jack Janasiewicz believes that the key will be the tone of Powell, which is expected to lean towards dovishness. "In short, as inflation continues to move towards the 2% target, combining this with signs of a weakening labor market, people will feel that there is almost no need to maintain a hawkish stance."
On the individual stock front, Target rose 11.2% after the retailer raised its full-year profit outlook and reported its first quarterly sales growth in over a year.
Macy's fell 12.9% as the department store chain lowered its annual net sales forecast.
Ford Motor Company rose 1.6% as the company announced it is adjusting its electric vehicle plans.
American Express fell over 3% after Bank of America downgraded the company's rating from Buy to Neutral, with the report stating: "Although we remain optimistic about American Express's long-term strategy, recent comments from retailers and travel companies indicate that the spending backdrop is challenging, even for high-end consumers."
JD.com's stock price fell 4.8%, with reports that its shareholder Walmart has sold all of its shares in the company.
International oil prices hit a 7-month low, with weak demand and easing Middle East tensions dampening the positive impact of declining U.S. crude oil inventories. The WTI crude oil contract fell 1.69%, trading at $71.93 per barrel, while the nearest month Brent crude oil contract fell 1.49%, trading at $76.05 per barrel.
International gold prices edged lower, with the COMEX gold futures contract for delivery in August at the New York Commodity Exchange falling 0.12%, trading at $2,508.40 per ounce.
