[New York Stock Market] Rises on Weak Dollar and Inflation Peak Expectations... Nasdaq Up 1.27%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York Stock Exchange closed higher on the 12th (local time) ahead of the August Consumer Price Index (CPI) release scheduled for the next day. The rally on Wall Street was driven by a weaker dollar and growing expectations that inflation has peaked.

On the New York Stock Exchange (NYSE) that day, the Dow Jones Industrial Average rose 229.63 points (0.71%) from the previous close to finish at 32,381.34. The large-cap focused S&P 500 index gained 43.05 points (1.06%) to close at 4,110.41, while the tech-heavy Nasdaq index rose 154.10 points (1.27%) to end at 12,266.41. The small-cap Russell 2000 index also closed higher by 23.24 points (1.23%) at 1,906.09.

By sector, energy stocks showed strength, supported by oil prices rising for three consecutive trading days. ExxonMobil closed up 1.19% from the previous session. Chevron rose 1.62%, and Occidental Petroleum jumped 1.81%. Major tech stocks, collectively known as 'MATANA,' also rallied. Apple gained 3.85% on the back of pre-orders for the new iPhone 14. Microsoft (+0.83%), Tesla (+1.58%), and Amazon (+2.39%) also posted gains.

Carvana surged 15.46% after investment firm Piper Sandler upgraded its rating from 'neutral' to 'overweight.' Pharmaceutical company Gilead Sciences rose 4.18% after announcing the resolution of patent litigation related to generics and HIV treatments. Bristol Myers Squibb gained 3.14% following news of FDA approval for a new migraine treatment drug. Walt Disney closed up 1.05% after billionaire investor Daniel Loeb hinted he would not pressure Disney to spin off ESPN.

Investors closely watched for hints on whether inflation has peaked ahead of the CPI release on the 13th. A cooling inflation rate could influence the pace of the Federal Reserve's tightening. Particularly, the weaker dollar and signs of changing tides in the Ukraine war boosted investor sentiment.

According to the Federal Reserve Bank of New York, consumers' one-year inflation expectations fell from 6.2% in July to 5.7% in August, the lowest level since October 2021. The three-year inflation expectations also dropped from 3.2% to 2.8%, the lowest since November 2020. Additionally, the August CPI released this week is estimated to have risen 8.0% year-over-year, with a 0.1% decline expected month-over-month.

Senior analyst Ipek Ozkadeskaya of Swissquote Bank said, "The recent market optimism reflects expectations that this week's CPI will ease for the second consecutive month." Philip Towes predicted, "The combination of a surprising victory in Ukraine and favorable inflation data could sustain the rally."

However, despite the slowing inflation indicators, many expect the Fed to maintain a significant rate hike this month. The Fed has raised rates by 0.25 percentage points in March, 0.5 points in May, and 0.75 points in both June and July. It is also keeping the possibility of a 0.75 percentage point hike this month open.

According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market on that day priced in a 92% chance of a 0.75 percentage point rate hike in September, up significantly from 57% a week earlier. Hawkish comments from Fed officials expressing concerns about persistent high inflation have increased expectations for a third consecutive 'giant step' (0.75 percentage point hike). Conversely, the probability of a 0.5 percentage point hike dropped from 43% to 8%.

In the New York bond market, the yield on the U.S. 10-year Treasury note rose slightly to 3.352% despite easing inflation expectations and a weaker dollar. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's 'fear gauge,' rose more than 4% to hover around the 23 level. No major economic indicators were released that day.

Oil prices increased. On the New York Mercantile Exchange, October West Texas Intermediate (WTI) crude oil closed at $87.78 per barrel, up 99 cents (1.14%) from the previous session. WTI prices have risen for three consecutive trading days.

Recently, the decline in the dollar's value from a 20-year high is interpreted as a factor behind the rise in oil prices, which are traded in dollars. The Dollar Index, which measures the dollar's value against six major currencies, stood at around 108 that day, having fallen to the 107 level during intraday trading.

This content was produced with the assistance of AI translation services.