According to data released by the U.S. Bureau of Labor Statistics on September 5, the U.S. non-farm employment increased by 142,000 in August, which is below the expected 165,000. In addition, the ADP employment report, referred to by the market as the "little non-farm," showed the slowest private sector job growth in three and a half years, with only 99,000 new jobs added. This is the weakest job growth since January 2021, significantly below the expected 145,000. ADP's Chief Economist, Nela Richardson, stated that after two years of rapid expansion, the labor market is clearly showing signs of weakness.

Focusing on individual stocks, on September 3, NVIDIA set a record for the largest single-day market value loss of a U.S. company, with its stock price falling by 9.5% and its market value shrinking by as much as $279 billion. NVIDIA, which once broke through a market value of $3 trillion with the wave of artificial intelligence, is now facing investor skepticism about the future of AI against the backdrop of signs of economic weakness in the United States.

How does the fluctuation in the technology sector affect the entire market? What trends does the latest employment data reflect in the U.S. labor market? On September 6, we invited Peter Cardillo, Chief Market Economist at Spartan Capital Securities, to delve into these hot topics.

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CPI Data Will Determine the Extent of Interest Rate Cuts

In the week ending September 6, the U.S. stock market was highly volatile. What do you think are the main reasons?

Peter Cardillo: There are several factors at play. First, the weakness in the technology sector is driven by NVIDIA's performance. Of course, there is also the impact of macroeconomic data. The August employment report was weaker than expected; although my personal forecast was for a non-farm employment increase of 116,000, the final data was higher than my forecast. However, overall, the result is still below the market's general expectations.

I believe the greater concern is that the labor market data has been revised downward for the second consecutive month, which means the real labor market may be weaker than these numbers suggest. This has sparked concerns in the market about whether the future economy can achieve a "soft landing."

What factors do you think will have a key impact on the stock market in the coming weeks?

Peter Cardillo: In a few days, we will see the release of the CPI data, and I expect the data to show a reduction in inflationary pressures. If that is the case, the Federal Reserve may announce a 50 basis point rate cut at the monetary policy meeting in mid-September. Based solely on the current employment data, the Federal Reserve may cut rates by 25 basis points. Of course, the Federal Reserve may need to re-examine their strategy.

In fact, two Federal Reserve officials have expressed their opinions, with (New York Fed President) Williams supporting a start with a 25 basis point rate cut, while (Federal Reserve Governor) Waller is open to considering a larger rate cut. So I believe that the upcoming inflation data will determine whether the rate cut will be 25 basis points or 50 basis points.Over the past two months, the technology sector has experienced significant volatility. What is your long-term outlook for the tech sector?

Peter Cardillo: Generally, I don't specifically discuss particular industries, but I can say that I remain optimistic about the long-term prospects of the technology industry. Even if we face an economic downturn, I don't believe it will be a severe and prolonged one; it might not truly manifest until the end of 2025. As long as we get through the market doldrums in September, I think the stock market will start to recover. With interest rates declining, the short-term pressure on consumers will also ease, and the burden of repaying credit cards and loans will be reduced, which will alleviate the burden of consumer borrowing.

The Federal Reserve's current round of rate cuts could reach 150 basis points.

The market currently expects the Federal Reserve to start cutting rates in mid-September. What is your view on Wall Street's debate over a 25 or 50 basis point rate cut?

Peter Cardillo: Before the August employment report was released, I was inclined to think there might be a 50 basis point rate cut. But now I believe the Federal Reserve doesn't want to make Wall Street overly nervous, so based on the latest employment data, I think they will opt for a 25 basis point rate cut.

Of course, if the upcoming inflation data unexpectedly shows a significant decrease in inflationary pressures, then the possibility of a 50 basis point rate cut would increase substantially. But for now, I lean more towards a 25 basis point rate cut. Of course, this does not rule out the possibility of the Federal Reserve cutting rates by another 50 basis points in November or December this year. Therefore, the total rate cut for this year could reach 75 basis points.

How many rate cuts do you expect the Federal Reserve to make in this round of the rate-cutting cycle?

Peter Cardillo: I anticipate the total rate cut could reach 150 basis points.

150 basis points? That's quite aggressive.

Peter Cardillo: Yes, I believe there will be a 75 basis point rate cut in 2024, and possibly another three rate cuts in 2025.Do you think the Federal Reserve is currently more concerned with inflation or employment data?

Peter Cardillo: The current situation is that inflation is moving in the right direction, and the Federal Reserve has clearly indicated this. Their concern for the labor market is greater at the moment. Powell emphasized at the Jackson Hole meeting that we cannot allow the labor market to become too weak or even experience negative growth.

So I believe this will be the top priority for the Federal Reserve in the coming period. If you consider today's revision of employment data, the labor market is indeed weaker than the data appears. Therefore, I believe the Federal Reserve will pay special attention to this, and the data for September is likely to be further revised downward.

The last question is about gold. Due to the weakening of the US dollar and the decline in US Treasury yields, gold prices rose to near a one-week high on Thursday. Against the backdrop of market expectations that the Federal Reserve may cut interest rates by 25 to 50 basis points, how do you view the subsequent trend of gold?

Peter Cardillo: I believe the price of gold will continue to rise. It is very likely that we will see the price of gold reach $3,000 in the next quarter. From a technical perspective, gold has been performing well. It found support near $2,520 per ounce and then rebounded to $2,560, but breaking through $2,600 is still a bit difficult. However, the market demand for gold remains strong. If you observe the inflow of funds into ETFs over the past two quarters, this shows that there is a large amount of buying in the market driving up the price of gold.