The U.S. stock market started mixed in the wake of the strong dollar and soaring

U.S. stocks rise on strong employment report, tech gains

The U.S. stock market started mixed in the wake of the strong dollar and soaring interest rates on government bonds as the employment report significantly exceeded expectations. However, the rise was expanded mainly on Nasdaq, reacting to the performance of some large technology stocks. In addition, the fact that expected inflation continued to stabilize after digesting the results of the employment report also contributed to the increase. Of course, the Russell 2000 index fell as the surge in interest rates on government bonds expanded to include some technology stocks, REITs Financial Group, and utilities. However, the Nasdaq continued to rise sharply, with the focus on large technology stocks (Dau + 0.35%, Nasdaq + 1.74%, S&P 500 + 1.07%, Russell 2000 - 0.59%, Philadelphia Semiconductor Index + 1.31%)

* Variables: Interpretation of employment reports

In the U.S. January employment report, the number of non-agricultural employees stood at 353,000, significantly exceeding the 170,000 expected by the market. While the unemployment rate remained 3.7%, hourly wages increased by 0.6%, double from 0.3% the previous month, up from 4.1% to 4.5% year-on-year. The surprising increase in the number of non-agricultural employees is estimated to be due to a 74,000 increase in professional and business services, which had been increasing by an average of 14,000 monthly in 2023, and an increase in the healthcare, retail, and social services sectors. On the other hand, accommodation and food services, which have led to job growth, have declined, with leisure and hospitality increasing by 11,000.

It is noteworthy that hourly wages have soared. As Fed Chairman Powell mentioned at the last FOMC, it can be said that the Fed's expectations for a rate cut in March have almost disappeared due to an increase in wages. However, despite this increase in wages, weekly working hours decreased from 34.3 hours to 34.1 hours. In particular, the leisure and hospitality industries decreased significantly from 25.8 hours to 25.3 hours. It is estimated that the reason for the rise in wages amid the decline in employment hours is due to the surge in employment of professional businesses and medical services, including high-wage workers. As such, the decline in weekly working hours and the increase in part-time jobs continue for economic reasons, the slowdown in employment can be seen as progressing

Of course, the CME FedWatch's probability of a March rate freeze rose to 80%, and the probability of a May rate freeze also jumped from 6% to 31%, weakening the Fed's possibility of an early rate cut. As a result, the dollar surged nearly 1%, and the 2-year Treasury yield and the 10-year Treasury bond soared nearly 20 basis points. Of course, the stock market reacted to the results of major technology stocks after starting off with a mixed trend in the early trading session, but there were many falling stocks due to soaring interest rates. In the future, economic indicators will be more important than performance.

  
* Features: Nvidia also strengthens on Meta's surge and bonus

Meta Platforms (+20.32%) soared thanks to its strong performance and the announcement of shareholder return policies, including the first dividend payment and share buyback. In addition, the announcement that it will increase its annual capital expenditure in 2024 to expand investment in hardware servers and data centers including AI is also positive for investors. The rise in Meta's capital expenditure is highlighted by the positive impact on Nvidia (+4.97%) and AMD (+4.21%). Microsoft (+1.84%) is also rising on the back of expectations of improving M/S in related industries, especially AI, due to Amazon's stagnant cloud service sector.

Amazon (+7.87%) rose on the back of better-than-expected earnings and a surge in margin despite poor cloud services and guidance. Apple (-0.54%) fell in the wake of a sharp drop in iPhone sales in China despite good earnings, and weak sales in the quarter. Apple parts stocks such as Skywalk (-1.75%), Quavo (-2.04%), Anarog Device (+0.05%), and Qualcomm (+0.41%) also fell or fluctuated. Intel (-1.75%) fell on news that it would delay building a $20 billion chip plant in Ohio due to market problems. Microchip Tech (-1.59%) reported earnings that met expectations, but fell due to sluggish guidance.

Chevron (+2.94%) rose as it reported better-than-expected results, but energy industries such as Exxon Mobil (-0.41%) and ConocoPhillips (-0.67%) are sluggish due to a drop in international oil prices. New York Community Bankoff (+5.04%) which recently stimulated the risk issue of local banks rose after analysts said it was not of concern. Of course, large bank stocks such as JPMorgan (+0.58%) and Wells Fargo (+0.88%) as well as other regional banks such as Comerica (+0.82%), Western Alliance Bankoff (+1.84%).

The surge in government bond interest rates is also sluggish in solar energy industries such as First Solar (-4.10%), SunPower (-7.30%), and JinkoSolar (-3.33%), as well as REITs financial industries such as American Tower (-2.46%) and Realty Income (-1.92%), and utility industries such as Nextra Energy (-2.68%), Saudan (-2.62%), and Dominion Energy (-2.23%).

* South Korean stock market-related figures

The MSCI Korea Index ETF rose 2.14 percent, but the MSCI Emerging Index ETF lost 0.28 percent. The Philadelphia Semiconductor Index rose 1.31 percent and the Dow Transportation Index rose 0.99 percent, but the Russell 2000 index of smaller companies fell 0.59 percent. Meanwhile, overnight futures fell more than 0.5 percent during the session to end with a 0.01 percent drop. The one-month NDF dollar/won exchange rate hit 1,336 won, 14 won higher than the 1,322.60 won recorded last Friday

* FICC: Dollar strengthens, interest rates soar

International oil prices fell in the wake of the strong dollar while OPEC+ countries maintained their quarterly production policies. In addition, concerns about the Chinese economy are also one of the factors that are falling. In addition, rising expectations for an Israeli-Palestinian ceasefire are also factors that are falling. Meanwhile, the impact is limited even though U.S. drilling operations have decreased. U.S. natural gas rose due to an influx of backlash buying after falling to its lowest level since April 2023.

Gold falls in the wake of a strong dollar and soaring interest rates on government bonds. Nonferrous metals such as silver and copper also fall in the wake of a strong dollar. In particular, nonferrous metals traded in the LME market fell in the wake of a strong dollar. Agricultural products such as wheat, soybeans and corn also fell in the wake of a strong dollar.

The dollar surged nearly 1% against other exchange rates on the back of a strong job market. This increased the possibility of a delay in the timing of the Fed's rate cut and a reduction in the number of rate cuts this year. The pound maintained interest rates through BOE monetary policy the previous day, but weakened against the dollar in that it left open the possibility of a rate cut based on falling prices.

Government bond rates surged in the wake of the U.S. January results that significantly exceeded expectations for non-agricultural employees, especially after wage growth hit 0.6% month-on-month, twice as high as expected. In particular, both 2-year and 10-year yields surged nearly 20 basis points during the market. Meanwhile, the CME announced through FEDWatch that there is an 80% probability of a rate freeze in March after the results of its employment report. The probability of a rate freeze in May was raised from 6% to 28%. These factors were missing, and it also rose from 6% to 28% in May.