US tech stocks rally lifts equity markets
United States (US) equity markets rose on Friday, propelled by a strong performance in tech stocks following a week dominated by mostly positive earnings reports and the US-China trade truce. This enabled key US equity indices to close the week in positive territory, despite a hawkish surprise from Federal Reserve (Fed) Chair Jerome Powell during last week’s Federal Open Market Committee (FOMC) meeting.
The Nasdaq 100 gained 1.97% for the week, theDow Jones added 355 points (0.75%), and the S&P 500 finished 0.71% higher.
Fed officials signal divergent views
Following Fed Chair Powell’s hawkish surprise last week, in which he pushed back against expectations of a Fed rate cut in December, speeches from key Fed officials on Friday underscored divergent views.
Dallas Fed President Lorie Logan advocated a cautious approach to monetary policy, stating preference to maintain steady rates this week given persistent high inflation and ongoing uncertainty. Cleveland Fed President Beth Hammack also opposed the recent October rate cut, expressing a preference for holding rates steady. Hammack emphasised that current policy is ‘barely restrictive, if at all’ and argued for maintaining a restrictive stance to curb inflation, pointing out that inflationary pressures extend beyond tariffs and that core services remain robust.
In contrast, Fed Governor Christopher Waller maintained a dovish perspective, suggesting that the Fed should proceed with rate cuts in December, citing potential risks to labour market stability.
Labour market data in focus
With the US Government shutdown set to extend this week – likely putting Job Openings and Labor Turnover Survey (JOLTS) Job Openings and Non-farm payrolls (NFP) data on hold – the focus will be on the Automatic Data Processing (ADP) employment report and the employment component within the Institute for Supply Management (ISM) purchasing managers’ index (PMI) to assess the health of the US labour market.
ADP employment change
Date: Thursday, 6 November at 12.15am AEDT
In September, the ADP employment report showed private business cut 32,000 jobs, following a revised loss of 3000 in August and below expectations of a 50,000 gain. It was the sharpest job decline since March 2023 and the first time since 2020 that the private sector has cut jobs for two consecutive months.
This trend confirmed signs of labour market cooling evident in other key measures of employment, which prompted the Fed to cut rates by 25 bp last week. For October, the primary expectation is for a rise of 24,000 jobs.
The US interest rate market is pricing in 17 bp of rate cuts for the December FOMC meeting and a total of 82 bp of Fed rate cuts between now and December 2026.