[New York Stock Market] Rises on Fed Minutes Indicating 'Pace Adjustment'... Nasdaq Up 0.99%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices of the U.S. New York stock market closed higher on the 23rd (local time), a day before the Thanksgiving holiday, buoyed by the minutes of the November Federal Open Market Committee (FOMC) meeting suggesting a possible reduction in the pace of interest rate hikes soon.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,194.06, up 95.96 points (0.28%) from the previous session. The S&P 500, centered on large-cap stocks, rose 23.68 points (0.59%) to 4,027.26, while the tech-heavy Nasdaq index closed at 11,285.32, up 110.91 points (0.99%).

By individual stocks, a rally was seen in technology stocks sensitive to interest rate hikes. Tesla closed up 7.82% after investment bank Citi upgraded its rating to neutral. Microsoft (+1.04%), Google Alphabet (+1.45%), Apple (+0.59%), and Nvidia (+3.0%) also rose together. However, energy stocks showed weakness, with Occidental Petroleum falling more than 2% due to the decline in international oil prices.

Mixed results were also confirmed based on earnings. Nordstrom’s stock fell more than 4% as its quarterly net profit turned to a loss. Agricultural machinery maker Deere jumped more than 5% on strong earnings. Additionally, Manchester United surged 25.84% after the club owner announced that they are exploring strategic alternatives including a potential sale.

Investors focused on the November FOMC minutes and corporate earnings released in the afternoon ahead of the Thanksgiving holiday. The financial markets will be closed on the 24th for Thanksgiving. On the 25th, the stock and bond markets will close early at 1 p.m. and 2 p.m., respectively, resulting in relatively low trading volume.

The New York stock market rose after the FOMC minutes revealed that a majority of participants agreed that "it would soon be appropriate to slow the pace of rate hikes." Currently, the central bank, the Federal Reserve (Fed), has raised the upper limit of the benchmark interest rate to 4.0%, the highest since 2008, through four consecutive giant steps (0.75 percentage point hikes).

The minutes stated, "Participants viewed that a slower pace would allow better assessment of progress toward maximum employment and price stability goals," and that they would "consider the cumulative tightening of monetary policy, lags in the effects of policy on economic activity and inflation, and economic and financial developments." Through these minutes, it was implied that the rate hike could be reduced to 0.5 percentage points starting from the December FOMC meeting.

However, the Fed also emphasized that continuing to raise rates remains appropriate. This aligns with Fed Chair Jerome Powell’s post-FOMC press conference remarks, which left room for slowing the pace but suggested the terminal rate could be higher. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) futures market currently prices in over a 75% chance of a 0.5 percentage point rate hike in December, similar to the previous day.

Regarding this, Jeffrey Roach, Chief Economist at LPL Financial, said, "It is a reasonable speculation that rates will be raised by 0.5 percentage points at the upcoming meeting (December)," adding, "The possibility of a recession next year looks increasingly likely, and if the Fed responds accordingly, the recession could be short and shallow." Art Hogan, Chief Market Strategist at B. Riley Financial, commented, "The market showed unease about the Fed and their thoughts on monetary policy."

After the release of the FOMC minutes, Treasury yields fell. In the New York bond market, the yield on the 10-year U.S. Treasury note dropped to around 3.69%. The 2-year yield, sensitive to monetary policy, fell to about 4.48%. The inversion of the yield curve, where the long-term 10-year yield is below the short-term 2-year and 3-month yields (4.314%), continues. This is generally considered a precursor to a recession.

Gold and the dollar also reacted. After the minutes were released, spot gold prices rose above $1,751 per ounce, and futures prices surpassed $1,751.8. The dollar retreated. The Dollar Index, which measures the dollar’s value against six major currencies, fell more than 1% to around 106.

The economic indicators released on this day showed mixed results. U.S. durable goods orders in October increased by 1.0% month-over-month, marking the third consecutive month of growth. This exceeded both the previous month’s 0.3% and market expectations of 0.5%. Meanwhile, weekly initial jobless claims rose by 17,000 to 240,000, surpassing market forecasts. The University of Michigan Consumer Sentiment Index fell to 56.8 in November from 59.9 in the previous month.

Douglas Leone, Global Managing Partner of Sequoia Capital, a U.S. venture capital firm, said at a startup event that day, "I believe the current economic situation is more difficult and challenging than the financial crisis of 2008 or the tech crisis of 2000," citing global interest rate hikes, the energy crisis, and geopolitical risks. He also predicted that the recession would continue until the year after next.

International oil prices fell as the Group of Seven (G7) countries, including the U.S., and the European Union (EU) monitored negotiations on a price cap for Russian crude oil. At the New York Mercantile Exchange, the January WTI (West Texas Intermediate) crude oil contract closed at $77.94 per barrel, down $3.01 (3.72%) from the previous session.