[New York Stock Market] Inflation Slowdown Expectations Resurface... Nasdaq Up 2.09%

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York Stock Exchange closed higher on the 12th (local time) as expectations for easing inflation indicators spread once again. Following the previously released July Consumer Price Index (CPI) and Producer Price Index (PPI), signals of easing inflation were consecutively detected, including U.S. import prices, reviving risk asset preference sentiment.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,761.05, up 424.38 points (1.27%) from the previous session. The large-cap focused S&P 500 index rose 72.88 points (1.73%) to 4,280.15, and the tech-heavy Nasdaq index closed at 13,047.19, up 267.27 points (2.09%).

Investors closely watched indicators that gauge inflation trends. After the July CPI and PPI growth rates both slowed, the July import price index released on this day also turned downward for the first time since December last year. July import prices fell 1.4% month-over-month, a larger drop than market expectations. This decline, like the CPI and PPI, is analyzed to largely reflect the recent downward trend in energy prices.

The University of Michigan's 1-year inflation expectations also eased to 5.0% from 5.2% the previous month. However, the 5-year inflation expectations slightly exceeded the previous month's increase, standing at 3.0%. The August University of Michigan Consumer Sentiment Index was 55.1, surpassing both the previous month and market forecasts.

As signals of easing inflation were confirmed in various places, the market increasingly weighs the view that the Federal Reserve (Fed), the central bank, will implement a 0.5 percentage point rate hike (a "big step") at the September meeting rather than a 0.75 percentage point hike (a "giant step"). According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) futures market reflects over a 57% chance of a big step rate hike in September next year. Bank of America (BoA) expects the Fed to raise rates to around 3.5?3.75% through the remaining meetings after a big step hike at the September meeting.

Michael Darda, Chief Economist at MKM Partners, said, "It would not be surprising to see a rally as inflation eases and the Fed slows the pace of rate hikes." Tom Essaye, founder of The Sevens Report, evaluated, "The current S&P 500 reflects improved investor sentiment."

However, cautious views remain strong in the market, arguing that it is still premature to conclude that inflation has peaked. There are concerns that expectations of easing inflation are excessively reflected in the rally. Senior Analyst Ifek Ozkadeskaya of Swissquote Bank commented, "Since this week's CPI release, overly optimistic pricing has been occurring."

Hawkish remarks continue within the Fed. Thomas Barkin, President of the Richmond Federal Reserve Bank, welcomed the slowing pace of inflation increases but emphasized, "Rate hikes must continue until inflation is under control."

Among major stocks, Apple rose 2.15% from the previous session, as it is analyzed to maintain last year's sales level despite forecasts that the global smartphone market will contract this year. PetroChina, a Chinese oil company listed in New York, fell more than 1% after announcing a voluntary delisting plan. Peloton surged over 13% following news of nearly 800 layoffs.

In the New York bond market, the 10-year Treasury yield fell to 2.84%. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street’s "fear gauge," dropped more than 3% from the previous session to the 19 level.

International oil prices declined. On the New York Mercantile Exchange, September West Texas Intermediate (WTI) crude oil prices closed at $92.09 per barrel, down $2.25 (2.38%) from the previous session.