US close: Stocks bounce back as labour market softens

By Sharecast News

Sharecast News | 02 Feb, 2024

23:29 24/12/24

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Wall Street equities experienced a notable rebound on Thursday, bouncing back from a significant sell-off in the previous session.

The resurgence in confidence came on the back of a less severe reading on a crucial gauge of wage pressures, after both the Federal Reserve and the Bank of England stood pat on interest rates this week.

At the close, the Dow Jones Industrial Average was up 0.97% at 38,519.84 points.

The broader S&P 500 climbed 1.25% to settle at 4,906.19 points, and the tech-heavy Nasdaq Composite recorded a gain of 1.3%, closing at 15,361.64 points.

In currency markets, the dollar was last down 0.03% on sterling to trade at 78.45p, while it saw a similar small drop of 0.04% against the euro to 91.94 euro cents.

Meanwhile, against the yen, the greenback saw a slight dip of 0.03%, changing hands at JPY 146.38.

“After seeing its worst one-day decline since September, the S&P 500 along with the rest of US markets have seen a modest rebound as last night’s Powell pushback on a March rate cut shifts the focus to the latest set of earnings numbers from the likes of Amazon, Apple, and Meta Platforms after the bell,” said CMC Markets chief market analyst Michael Hewson.

“With the disappointment over Alphabet and Microsoft’s numbers very much front-of-mind, the hope is that tonight’s numbers from the rest of the ‘magnificent seven’ and call a halt to two days of decline on the Nasdaq 100.”

Labour market eases, cost of labour grows modestly

In economic news, the US labour market experienced a modest easing during the last week after several months of notable tightness.

According to the Department of Labor, initial unemployment claims increased by 9,000 to 224,000 for the week ended 27 January on a seasonally-adjusted basis, compared to consensus expectations for 212,000.

The four-week moving average of initial claims also saw a rise of 5,250, reaching 207,750, while secondary claims, which include those not filed for the first time and pertained to the week ended 20 January, surged 70,000 to 1.898 million.

“WARN notices and Challenger layoff announcements signal that claims will move higher over the next few months, to around 250,000,” noted Kieran Clancy, senior US economist at Pantheon Macroeconomics.

“That would still leave claims at an extremely low level by past standards, but the increase would be clearly visible after months of readings at 200,000 to 200,000, raising fears of a meaningful shift in labour market conditions.”

On another note, there was a positive development in terms of labour cost growth due to improved productivity at the close of 2023.

The Labor Department reported that seasonally adjusted labour productivity increased at a quarterly annualised pace of 3.2% in the fourth quarter, surpassing expectations for 2.5%.

At the same time, nominal hourly compensation saw a 3.7% rise, resulting in unit labour costs increasing by a modest 0.5%, well below the consensus estimate of 1.7%.

Elsewhere, fresh survey data revealed that factory sector activity bounced back at the beginning of the year.

S&P Global's manufacturing sector purchasing managers' index (PMI) improved from December's reading of 47.9 to 50.7 in January, surpassing the preliminary estimate of 50.3.

The 50-point mark distinguishes between expansion and contraction.

That improvement was supported by an increase in new orders and a slowdown in the rate of output contraction.

However, the survey noted a decline in supplier performance, longer input delivery times, higher transportation costs, and the quickest rise in selling prices since April last year.

Companies did, however, add staff for the first time since September.

In contrast, another closely-watched survey indicated that factory sector activity in the US continued to contract in January, albeit at a slower pace.

The Institute for Supply Management's manufacturing sector PMI rose from a December reading of 47.1 to 49.1 in January, which was still well ahead of expectations for 47.0.

The bulk of the improvement was attributed to a significant increase in the sub-index related to new orders, rising from 47.0 to 52.5.

Additionally, the sub-index tracking production levels in companies edged up from 49.9 to 50.0.

The sub-index for prices also saw a notable increase, climbing 7.7 points to reach 52.9.

On the international front, the Bank of England opted to maintain interest rates at 5.25% earlier in the day, aligning with widespread expectations.

Within the nine-member Monetary Policy Committee, six members voted in favour of keeping borrowing costs steady, while three favoured the status quo.

Merck and Plug Power rise, Honeywell falls back

In equity markets, Plug Power jumped 5.62% after it announced a significant milestone at its recently inaugurated plant.

Merck & Co also saw positive gains, climbing 4.64% on the back of robust earnings, primarily driven by strong growth in its cancer and vaccine products.

On the downside, Honeywell International slid 2.45% despite its earnings aligning with Wall Street's expectations.

Reporting by Josh White for Sharecast.com.

Dow Jones - Risers

Merck & Co. Inc. (MRK) $126.38 4.64%
Amgen Inc. (AMGN) $324.56 3.28%
Walgreens Boots Alliance, Inc. (WBA) $23.25 3.01%
Coca-Cola Co. (KO) $60.98 2.50%
Caterpillar Inc. (CAT) $307.66 2.46%
Home Depot Inc. (HD) $360.08 2.01%
Walmart Inc. (WMT) $168.31 1.85%
McDonald's Corp. (MCD) $298.08 1.83%
International Business Machines Corporation (CDI) (IBM) $186.90 1.76%
3M Co. (MMM) $95.91 1.65%