[New York Stock Market] Doubts Over Peak Despite Producer Price Slowdown... Nasdaq Down 0.58%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] The major indices of the U.S. New York stock market closed mixed in a narrow range on the 11th (local time), closely watching inflation indicators. Following the previous day’s news of a slowdown in the Consumer Price Index (CPI) increase, the Producer Price Index (PPI) also showed easing, but there was no significant market movement. This was due to the widespread view that the Federal Reserve’s (Fed) rate hike path will continue until clearer signals of inflation easing are confirmed.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,336.67, up 27.16 points (0.08%) from the previous session. The large-cap S&P 500 index fell 2.97 points (0.07%) to 4,207.27, and the tech-heavy Nasdaq index closed down 74.89 points (0.58%) at 12,779.91.

By sector, energy stocks rallied as oil prices rose. Devon Energy closed up 7.34% from the previous session. Marathon Oil (+7.03%), Schlumberger (+5.64%), and Diamondback Energy (+5.35%) recorded particularly notable gains among S&P 500 companies. Occidental Petroleum also rose 4.5%.

On the other hand, tech stocks such as Tesla (-2.62%), Meta (-0.48%), Apple (-0.44%), Nvidia (-0.86%), and Microsoft (-0.74%) were weak.

Walt Disney, which released earnings after the previous day’s close, jumped 4.68%, boosted by subscriber growth exceeding market expectations. Six Flags Entertainment plunged more than 18% after its pre-market earnings announcement fell short of forecasts. Pfizer dropped 3.32% amid litigation controversies. Sanofi, also involved, fell 3.33%.

Investors closely monitored inflation indicators such as CPI and PPI, released for two consecutive days starting the previous day. The July PPI released on this day rose 9.8% year-over-year, marking the first single-digit increase since November last year (9.9%). The increase was also significantly slower compared to June’s rise (11.3%). Notably, July PPI fell 0.5% month-over-month, turning the monthly growth rate negative for the first time in over two years.

The market interpreted this PPI slowdown as a signal that inflationary pressures have somewhat eased, considering that wholesale price increases eventually pass through to consumer prices. The previously released July CPI increase was also confirmed to have slowed to 8.5% from 9.1% in June. This led to a rally in the morning session fueled by the inflation data. However, the mood began to cool in the latter part of the session. This was due to growing assessments that these indicators were not sufficient to halt Fed rate hikes, and analyses suggesting that the rally following the CPI release the previous day may have been excessive.

Wayne Wicker, Chief Investment Officer at MissionSquare Retirement, said, "Investors are relieved by the fact that inflation is slowing," but pointed out, "The fact that the Fed will continue to raise rates has not changed." Anthony Sagrimbene of Ameriprise said, "Inflation is still very high," and "The Fed has a lot of work to do to continue raising rates."

According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market currently reflects a 59.5% probability of a 0.5 percentage point rate hike in September. The possibility of a 0.75 percentage point hike, which would be the third consecutive giant step, stands at 40.5%. Fed officials, who have recently made hawkish remarks, continued their statements. Mary Daly, President of the Federal Reserve Bank of San Francisco, told the Financial Times, "Inflation is still high," and "It is too early to declare victory in the fight against inflation."

In the New York bond market, the yield on the U.S. 10-year Treasury note jumped to around 2.89%. The 2-year yield, sensitive to monetary policy, rose to 3.23%. The yield curve steepened further. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street’s ‘fear index,’ rose more than 2% from the previous session to above 20.

The unemployment data released on this day was disappointing. According to the U.S. Department of Labor, the number of weekly new unemployment insurance claims for the week ending on the 6th increased by 14,000 from the previous week to 262,000, marking the highest since November last year.

Oil prices rose on news that the International Energy Agency (IEA) raised its demand forecast. On the New York Mercantile Exchange, September West Texas Intermediate (WTI) crude oil closed at $94.34 per barrel, up $2.41 (2.62%) from the previous session.