[New York Stock Market] Volatility Awaits CPI... S&P 500 Declines for 6 Consecutive Trading Days

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices of the U.S. New York stock market fluctuated between gains and losses on the 12th (local time) as investors awaited the next day's Consumer Price Index (CPI) announcement, ultimately closing slightly lower across the board. The S&P 500 index, centered on large-cap stocks, fell for the sixth consecutive trading day, marking its lowest level since November 2020.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 29,210.85, down 28.34 points (0.10%) from the previous session. The S&P 500 index ended at 3,577.03, down 11.81 points (0.33%), and the tech-heavy Nasdaq index closed at 10,417.10, down 9.09 points (0.09%). Both the S&P and Nasdaq indices have been declining for six consecutive trading days.

Among individual stocks, PepsiCo, a representative defensive stock, closed up 4.18% on strong earnings. Benefiting significantly from product price increases, PepsiCo also raised its earnings guidance for the year. Norwegian Cruise Line surged 11.61% after investment bank UBS upgraded its rating to buy. Competitors Carnival (+10.09%) and Royal Caribbean (+11.48%) also recorded double-digit gains. Moderna jumped 8.28% following the announcement of a partnership with pharmaceutical company Merck to jointly develop a cancer vaccine.

The market showed volatility due to stronger-than-expected Producer Price Index (PPI) pressure. Investors closely watched the September PPI and the minutes of the September Federal Open Market Committee (FOMC) meeting to gauge the Federal Reserve's (Fed) future tightening pace. The September PPI rose 8.5% year-over-year, exceeding market expectations. The month-over-month increase was 0.4%, also above forecasts, confirming persistent inflationary pressures.

With inflationary pressures reaffirmed, bets on the Fed's fourth consecutive giant step (0.75 percentage point rate hike) have increased. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds (FF) futures market currently prices in an over 86.8% chance of a 0.75 percentage point rate hike in November, up from 65.9% a week ago.

Fed officials emphasizing tightening continued. Neel Kashkari, president of the Minneapolis Federal Reserve Bank and a known dove, dismissed the possibility of a Fed policy pivot during a speech in Wisconsin. Kashkari stated, "If the economy suddenly declines, we can stop what we are doing. If inflation falls very, very quickly, we can pivot whenever necessary," but added, "We are not seeing such signs."

Minutes from the September FOMC meeting released that afternoon reaffirmed the existing stance that "it is essential to maintain a more restrictive policy stance to fulfill the Committee's mandate of maximum employment and price stability." The minutes also included that raising rates more aggressively at this point is necessary to prevent much greater economic pain related to entrenched high inflation. This implies a willingness to sacrifice some economic growth to reduce inflation.

On the other hand, some voices suggested a slowdown in pace due to recent sharp increases in economic uncertainty and financial market instability. There were concerns that the Fed might restrict total demand more than expected. Some participants noted that after assessing the cumulative effects of policy adjustments on economic activity and inflation, it would be appropriate to slow the pace of rate hikes "at some point."

Following the release of the minutes, investors bought bonds and stocks, causing Treasury yields to fall and the stock market to rebound. Ben Jeffrey, strategist at BMO, said, "People may have been reluctant to buy ahead of the risk that the minutes could contain hawkish surprises." Kiran Ganeshe, strategist at UBS, referring to the stronger-than-expected PPI, said, "Expectations have risen that the Fed will keep rates higher for longer to bring down inflation."

Investors are now focusing on the CPI to be released the next day. Market consensus expects an 8.1% year-over-year increase, slightly down from the previous month's 8.3%. However, the month-over-month increase is estimated at 0.3%, higher than August's 0.1%.

In the New York bond market, the 10-year Treasury yield stood at around 3.9%. The 2-year yield, sensitive to monetary policy, slightly declined to 4.29%. Following the Bank of England's (BOE) intervention, financial market instability has not subsided, and investors are also watching the sharp rise in UK government bond yields. BOE Governor Andrew Bailey confirmed the end of the purchase program scheduled for the 14th.

Oil prices continued to decline. On the New York Mercantile Exchange, November West Texas Intermediate (WTI) crude oil closed at $87.27 per barrel, down $2.08 (2.33%) from the previous session.

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