New York Stock Market Mixed in Early Trading Awaiting FOMC Results

The major indices of the U.S. New York stock market are showing mixed trends in the early session on the 14th (local time) as they await the June Federal Open Market Committee (FOMC) interest rate decision to be announced in the afternoon.

At around 10:55 a.m. on the New York Stock Exchange (NYSE), the Dow Jones Industrial Average was trading at around 34,074, down 137.29 points (0.40%) from the previous close. Meanwhile, the large-cap-focused S&P 500 index was up 10.49 points (0.24%) at 4,379, and the tech-heavy Nasdaq index was up 44.08 points (0.32%) at 13,617.

Currently, all nine sectors of the S&P 500, except for energy and healthcare stocks, are showing slight gains. Tesla, which recorded a record 13 consecutive trading days of rallies yesterday, is showing a firm price today. Nvidia, which surpassed a market capitalization of 1 trillion won based on the previous day's closing price, is trading more than 2% higher. AMD is rising nearly 2% following foreign reports that Amazon Web Services is considering using AMD’s new artificial intelligence (AI) chips. Alphabet (Google) is slightly down after the European Union (EU) issued an antitrust investigation report alleging violations in the digital advertising market.

[Image source=Reuters Yonhap News]

Investors are closely watching the Federal Reserve’s FOMC meeting results, which will be released at 2 p.m. Eastern Time today. The market widely expects the Fed to skip a rate hike this time while signaling a possible increase as early as July, a so-called ‘hawkish skip.’ Since last March, the Fed has raised the benchmark interest rate 10 consecutive times, pushing it to the 5-5.25% range, and this would mark its first pause.

If the rate is held steady, Fed Chair Jerome Powell is expected to emphasize a hawkish tone during the press conference starting at 2:30 p.m., stating that the tightening cycle is not over and that rate hikes remain possible at any time. On the other hand, investors will likely seek signals that rate hikes are nearing an end and hints about how long the high 5% interest rates will persist.

The market’s expectation for a pause has been strengthened by the consumer price index (CPI) data released the previous day, which showed the lowest inflation rate in two years and two months. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds (FF) futures market currently prices in nearly a 98% chance of a rate hold. This is higher than the 72% probability a week ago and the 93% probability after the CPI release yesterday.

The producer price index (PPI) for May, released today, also reaffirmed signs of easing inflation. The May PPI rose 1.1% year-on-year, marking the smallest increase since 2020. The month-on-month increase fell by 0.3%, a larger drop than the market expectation of -0.1%. This reversed the 0.2% rise seen in April to a decline in one month. Since the PPI is generally considered a leading indicator of consumer prices, market expectations for a continued easing of inflation are growing.

Joseph Cusick, Senior Vice President at Calamos Investments, said, "With low volatility and the Fed appearing ready to hold rates steady, it will be interesting to see where the market heads after today’s (monetary policy) announcement." However, Bespoke Investment Group noted in a report that "the S&P 500 has fallen by more than 1% on average on the six previous FOMC days," suggesting that investor optimism may be dampened on the actual FOMC day.

Meanwhile, investors are also focusing on the dot plot and revised economic forecasts to be released today. These will be used to gauge the future direction of monetary policy. In particular, the key issue is how much the year-end rate forecast in the dot plot will be raised compared to previous projections. In March, the Fed’s dot plot showed a median year-end rate forecast of 5.1%, and U.S. interest rates have already reached that level.

In the New York bond market, expectations for a rate hold have strengthened, causing Treasury yields to decline. The 10-year U.S. Treasury yield is trading around 3.79%, and the 2-year Treasury yield, which is sensitive to monetary policy, is around 4.62%. The dollar index, which measures the value of the U.S. dollar against six major currencies, is down more than 0.6% at around 102.7. The Volatility Index (VIX), known as Wall Street’s fear gauge, is down more than 1% at 14.3, below its long-term average of 20.

International oil prices are rising. The July West Texas Intermediate (WTI) crude oil price is slightly up from the previous close, trading around $70 per barrel.

European stock markets are also rising. Germany’s DAX index is up 0.48%, the UK’s FTSE index is up 0.15%, and France’s CAC index is up 0.47% compared to the previous close.

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