[New York Stock Market] FOMC Watch Leads Broad Gains... Nasdaq Up 1.69%

[Asia Economy Reporter Yujin Cho] Major indices on the U.S. New York Stock Exchange closed higher on the 31st (local time), as investors closely watched the Federal Reserve's two-day Federal Open Market Committee (FOMC) regular meeting. Attention is focused on whether hints about the future policy path will emerge from this meeting, and optimism surged as data showing a moderation in wage-driven inflation was released, suggesting it could influence the Fed's decision.

On the New York Stock Exchange (NYSE) that day, the Dow Jones Industrial Average closed at 34,086.04, up 368.95 points (1.09%) from the previous session. The S&P 500, which is centered on large-cap stocks, rose 58.83 points (1.46%) to 4,076.60, and the tech-heavy Nasdaq index closed at 11,584.55, up 190.74 points (1.67%).

Over the course of the month, the Dow rose 2.1%, and the S&P 500 increased 5.4%, marking the best monthly performance for both indices since November of last year, according to an analysis by The Wall Street Journal (WSJ).

By stock, ExxonMobil's shares rose 2.16% despite quarterly sales falling short of expectations, buoyed by cheers over record annual profits.

General Motors (GM) surged 8.35% after reporting fourth-quarter sales and net income that beat market expectations and stating it has no plans to join Tesla's trend of electric vehicle price cuts. GM's stock rose sharply as vehicle production rebounded due to easing supply chain disruptions despite the economic downturn.

McDonald's posted solid quarterly results driven by price increases and promotional effects, but its shares fell by over 2% as warnings that inflation will continue to pressure the business dampened investor sentiment. Caterpillar dropped 3.6%, marking its largest decline since last September, after news that its fourth-quarter net income fell short of market expectations.

[Image source=Reuters Yonhap News]

Investors focused on this year's first FOMC regular meeting, which is ongoing over two days, as well as economic indicators.

The Employment Cost Index (ECI) for the fourth quarter of last year rose 1.0% quarter-over-quarter on a seasonally adjusted basis, slightly below the previous quarter's 1.2% increase and the 1.1% rise economists surveyed by The Wall Street Journal had expected. Employment costs are among the indicators the Fed closely monitors. A decline in employment costs reduces wage-driven inflationary pressures.

Housing price indicators were also not positive. U.S. home prices fell for the fifth consecutive month due to the Fed's interest rate hikes and other factors. The seasonally adjusted S&P CoreLogic Case-Shiller National Home Price Index for November last year dropped 0.6% from the previous month, marking five straight months of decline. The year-over-year home price increase for November was 7.7%.

This was lower than the 9.2% increase recorded the previous month. The 20-city home price index also fell 0.5% month-over-month on a seasonally adjusted basis, marking five consecutive months of decline. Year-over-year, it rose 6.8%, below both the previous month's 8.6% increase and the market's expected 7% rise.

However, market participants reacted to the data indicating a moderation in wage-driven inflation, fueling optimism that it will influence the Fed's decision.

Hans Olsen, Chief Investment Officer (CIO) at U.S. Fiduciary Trust, said, "The December unemployment rate and wage data are premature to say that the Fed can complete its rate hike process. However, news that wage-driven inflationary pressures are easing is being perceived as an early stage of inflation normalization, and investors' expectations are ahead."

The Fed is expected to raise the benchmark interest rate by 0.25 percentage points at this year's first FOMC regular meeting.

In the interest rate futures market, it is expected that the benchmark rate will reach 4.9% in June, followed by two rate cuts by the Fed in the second half of this year.

Jerome Powell, Chair of the Fed, dismissed the possibility of rate cuts during a press conference following the December FOMC, stating that rate hikes will continue this year and that high rates will be maintained for some time even after the hikes stop.

Bloomberg News analyzed that although additional evidence confirming a slowdown in wage growth was found in the economic data released that day, it is unlikely to shake the Fed.