[New York Stock Market] Declines Amid CPI and Debt Ceiling Watch... Nasdaq Down 0.63%

The three major indices of the U.S. New York stock market all closed lower on the 9th (local time), awaiting key inflation indicators to be released this week, as well as debt ceiling increase discussions between President Joe Biden and congressional leaders.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 56.88 points (0.17%) from the previous close to finish at 33,561.81. The large-cap S&P 500 index dropped 18.95 points (0.46%) to 4,119.17, while the tech-heavy Nasdaq index declined 77.36 points (0.63%) to close at 12,179.55.

Among the S&P 500 sectors, all but industrials, consumer discretionary, and energy stocks fell. Palantir surged more than 23% from the previous close on better-than-expected earnings. Novavax jumped nearly 28% following a cost-cutting announcement including layoffs. Electric vehicle maker Lucid fell over 5% due to disappointing results. 3D Systems also dropped more than 9% amid weak earnings and news of workforce reductions. Amid ongoing concerns over regional banks, PacWest Bancorp rose over 2%, while Western Alliance Bancorp declined more than 1%.

[Image source=Reuters Yonhap News]

Investors focused on regional bank concerns, debt ceiling increase talks, and the possibility of default ahead of this week’s release of the Consumer Price Index (CPI) and Producer Price Index (PPI) data. Edward Moya, senior market analyst at OANDA, said, "Wall Street is hesitant to take a strong stance until the outcome of debt ceiling discussions at the White House and whether inflation becomes entrenched are clear." He added, referencing the Silicon Valley Bank (SVB) crisis and potential tightening of lending regulations, "No one doubts that bank stress will not disappear."

President Biden and House Speaker Kevin McCarthy, along with other bipartisan leaders, met at 4 p.m. local time, the market close, to discuss the debt ceiling situation. However, expectations are low for a final agreement from this meeting. Republicans are demanding large government spending cuts as a precondition, while Biden and Democrats insist on a debt ceiling increase without conditions, leading to a standoff. The U.S. exhausted its $31.4 trillion debt ceiling in January and has been using extraordinary measures to buy time, but those are nearing their limits.

U.S. Treasury Secretary Janet Yellen has repeatedly warned that failure to raise the debt ceiling would inevitably cause an unprecedented default with severe economic repercussions. Yellen’s projected X-day is early June. The bipartisan think tank Bipartisan Policy Center (BPC) in Washington, D.C., has also moved up the X-day, when the federal government runs out of cash to pay debts, to early June through early August.

The following day, the U.S. April CPI will be released. Following a strong employment report released late last week, if this week’s inflation data also exceeds expectations, hopes for a Federal Reserve (Fed) rate cut within the year are expected to diminish further. Susanna Streeter of Hargreaves Lansdown said, "Investors are moving cautiously ahead of inflation data that will help assess the next steps for interest rates."

Wall Street experts estimate that the U.S. April CPI will rise 5% year-over-year and 0.4% month-over-month. The year-over-year rate is expected to remain the same as March, while the month-over-month increase is forecast to be larger than March’s 0.1%. The market remains wary of sticky core inflation as well. Core CPI, which excludes volatile energy and food prices, is expected to rise 5.5% year-over-year and 0.4% month-over-month. Additionally, the April PPI, a wholesale price index, is scheduled for release on the 11th.

Speeches from Fed officials, including John Williams, president of the New York Federal Reserve Bank and considered the Fed’s third most influential figure, continue. Williams, who holds a voting seat on this year’s Federal Open Market Committee (FOMC), said at the New York Economic Club that "due to policy lags, it will take time for FOMC actions to restore economic balance and bring inflation back to the 2% target." He added, "I have not said rate hikes are over," and "decisions will be data-driven," signaling that rate increases remain possible depending on future inflation data.

Earlier, the Fed raised the benchmark interest rate by 0.25 percentage points as expected and indicated a possible pause in future hikes. According to the Chicago Mercantile Exchange (CME) FedWatch tool, as of the afternoon, federal funds futures market prices reflect an over 84% probability that the Fed will hold rates steady at the June FOMC meeting. The chance of an additional quarter-point hike is around 15%. Despite Fed Chair Jerome Powell’s firm statement that no rate cuts will occur this year, futures markets still weigh the possibility of cuts as early as July to September.

In the New York bond market on the day, the yield on the U.S. 2-year Treasury note, sensitive to monetary policy, hovered around 4.03%, while the 10-year yield was near 3.53%. The dollar index, which measures the dollar’s value against six major currencies, rose about 0.25% from the previous close to around 101.6.

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