[New York Stock Market] Mixed Close Ahead of This Week's CPI... Nasdaq Up 0.18%

The three major indices of the U.S. New York stock market closed mixed and flat on Monday, the 8th (local time), amid concerns over regional banks and in anticipation of key inflation indicators to be released this week.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,618.69, down 55.69 points (0.17%) from the previous session. The S&P 500, focused on large-cap stocks, rose 1.87 points (0.05%) to 4,138.12, while the tech-heavy Nasdaq index closed up 21.50 points (0.18%) at 12,256.92.

Within the S&P 500, telecommunications, financial, and energy stocks rose, whereas real estate, industrial, healthcare, and utilities sectors declined. PacWest Bancorp, which has been subject to takeover rumors following First Republic Bank, rose more than 3% from the previous close. PacWest, which surged double digits early in the session, pared gains in the afternoon. Western Alliance and Zions Bancorporation also rose by 0.59% and 2.1%, respectively. Among major banks, shares of Wells Fargo, JP Morgan Chase, and Citigroup increased.

Est?e Lauder jumped 1.21% following foreign reports that activist investor Nelson Peltz is considering management restructuring. Walt Disney, set to report earnings this week, gained 2.44%. Conversely, Tyson Foods fell more than 16% after posting an unexpected quarterly loss and lowering its annual sales guidance. Occidental Petroleum dropped nearly 3% after Berkshire Hathaway stated it does not plan to fully acquire its stake.

[Image source=Reuters Yonhap News]

Investors are closely watching concerns over the regional banking crisis while awaiting this week’s release of the Consumer Price Index (CPI) and Producer Price Index (PPI). They aim to assess the cumulative effects of tightening monetary policy and gain hints about the future economic outlook. Following a strong employment report released late last week, if this week’s inflation data also exceed expectations, the Federal Reserve’s (Fed) prospects for rate cuts within the year are expected to diminish further.

The U.S. April CPI, to be released on the 10th, is estimated to have risen 5% year-over-year. The core CPI inflation rate is expected to slightly ease to 5.5% from 5.6% in March. On the 11th, the PPI, a wholesale price gauge, will be announced. The PPI, which fell from the 11% range in June last year to the high 2% range in March this year, is expected to continue its slowdown in April. On the 12th, the University of Michigan Consumer Sentiment Index is also scheduled for release.

On the same day, the New York Federal Reserve Bank released data showing the expected inflation rate over the next year at 4.4%, down 0.3 percentage points from the previous month. However, the expected inflation rates over three and five years rose by 0.1 percentage points each to 2.9% and 2.6%, respectively. Additionally, consumer spending one year ahead is projected to increase by only 5.2%, marking the smallest rise since September 2021.

Earlier, as expected by the market, the Fed raised the benchmark interest rate by 0.25 percentage points and indicated a possible pause in future rate hikes. According to the Chicago Mercantile Exchange (CME) FedWatch tool, as of the afternoon, federal funds futures markets reflect an over 88% probability that the Fed will hold rates steady at the June FOMC meeting. The chance of an additional “baby step” hike stands at 12%, slightly higher than the previous day.

Mike Wilson, Morgan Stanley’s chief U.S. equity strategist, stated in an investor memo that stock prices are overly optimistic and he does not expect rate cuts in 2023. Earlier, Fed Chair Jerome Powell also ruled out rate cuts within the year. This week, speeches by Fed officials, including John Williams, president of the New York Fed and considered the Fed’s third-ranking official, are scheduled. Following rate hikes by the Fed and the European Central Bank (ECB) last week, the Bank of England (BOE) will also hold its monetary policy meeting.

Meanwhile, investors continue to monitor ongoing concerns centered on the U.S. regional banking sector, especially following the bankruptcy of First Republic Bank. Edward Moya, senior market analyst at OANDA, said, "Wall Street will want to confirm whether the banking stress is nearly over," adding, "This week won’t be as busy as last week but will still be important." U.S. Treasury Secretary Janet Yellen appeared on CNBC in the afternoon, emphasizing that the U.S. banking system remains sound.

Concerns over the U.S. debt ceiling negotiations also add to market uncertainty. Secretary Yellen has repeatedly warned of the possibility of a default ahead of the debt ceiling meeting scheduled for the 9th between President Joe Biden and House Speaker Kevin McCarthy. She warned again that a default would be an "economic disaster." The X-day she indicated is early June.

However, the Republican Party continues to insist on large-scale government spending cuts as a precondition, making debt ceiling negotiations difficult, according to prevailing views. Earlier this month, the White House Council of Economic Advisers released a scenario estimating that a prolonged default could cause the stock market to plunge 45% and result in the loss of up to 8.3 million jobs.

In the New York bond market on the day, U.S. Treasury yields rose. The 2-year Treasury yield, sensitive to monetary policy, hovered around 4.0%, while the 10-year yield was near 3.51%. The dollar index, which measures the dollar’s value against six major currencies, rose 0.19% to 101.4.

International crude oil prices rose for the second consecutive trading day. On the New York Mercantile Exchange, June delivery West Texas Intermediate (WTI) crude closed at $73.16 per barrel, up $1.82 (2.55%) from the previous session.

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