[New York Stock Market] Mixed Close on CPI Surpassing Expectations... Dow Down 0.46%

[Asia Economy New York=Special Correspondent Joselgina] Major indices of the U.S. New York stock market closed mixed on the 14th (local time) as they digested the January Consumer Price Index (CPI) inflation rate that exceeded expectations.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 156.66 points (0.46%) from the previous close to finish at 34,089.27. The S&P 500 index, centered on large-cap stocks, recorded 4,136.13, down 1.16 points (0.03%). Meanwhile, the tech-heavy Nasdaq index rose 68.36 points (0.57%) to close at 11,960.15.

By sector, discretionary consumer goods, technology, and materials stocks within the S&P 500 rose, while real estate, financials, and consumer staples declined. Boeing rose 1.30% from the previous close following the announcement that Air India will purchase more than 200 Boeing passenger planes. Nvidia jumped 5.43% after Bank of America (BoA) released a report stating it could be the winner in the artificial intelligence (AI) competition. Tesla rose 7.51% on news of George Soros's purchase. Palantir surged more than 21% due to strong earnings announced the previous day.

Investors focused on the CPI released that day, the Federal Reserve's (Fed) future monetary policy path in response, and remarks from Fed officials. The January CPI exceeded market expectations, intensifying concerns about Fed tightening. As Fed officials who have continued hawkish remarks feared, upward pressure on housing and service prices was significant.

According to the U.S. Department of Labor, the January CPI rose 6.4% year-over-year. Although it slightly declined from the previous month's 6.5%, continuing a seven-month slowdown trend, the pace of deceleration slowed. It also far exceeded Wall Street's market forecast of 6.2%. Notably, the January CPI rose 0.5% month-over-month, significantly increasing from December's 0.1% and surpassing the market forecast of 0.4%. This was also the largest monthly increase since October last year.

Core CPI, which excludes volatile energy and food prices, rose 5.6% year-over-year and 0.4% month-over-month. Core CPI also exceeded market expectations (5.4% year-over-year, 0.3% month-over-month).

Accordingly, the possibility that the Fed will maintain higher interest rates for a longer period than the market expects is gaining strength. Following the release of a strong January employment report earlier this month that far exceeded market expectations, speculation about an early end to rate hikes has largely faded. With the CPI released that day also exceeding expectations, it could serve as a trigger for the Fed to increase the intensity of monetary tightening.

Jeffrey Roach, Chief Economist at LPL Financial, said, "Inflation is easing, but the path to lowering inflation will not be smooth," adding, "Concerns are growing that inflation may not cool as quickly as the Fed wants."

Maria Vassalou, Chief Investment Officer of Multi-Asset Solutions at Goldman Sachs Asset Management, said, "The strength of core CPI suggests the Fed has a lot of work to do to bring inflation back to the 2% target," and added, "If retail sales released the next day also show strength, the Fed may need to raise the benchmark interest rate to 5.5% to curb inflation." The current U.S. benchmark interest rate is 4.5-4.75%.

The interest rate futures market also reacted sensitively. According to the Chicago Mercantile Exchange (CME) FedWatch, which reflects U.S. interest rate market expectations, immediately after the CPI announcement, the federal funds (FF) futures market reflected more than a 90% probability that the benchmark interest rate (lower bound) in September will be above 5%. The forecast that rates will remain above 5% until December was also over 60%. Until early this month, the market widely expected the Fed to end rate hikes as early as March and begin cutting rates in the second half of the year.

Fed officials' remarks continued on the day. John Williams, President of the Federal Reserve Bank of New York, emphasized, "We must continue to achieve the 2% inflation target," adding, "Our work is not done yet." Thomas Barkin, President of the Richmond Fed, said, "Inflation is normalizing but slowly." Patrick Harker, President of the Philadelphia Fed, said, "It is not over yet," but added, "We are close to the end," predicting that rate hikes will stop at some point this year.

Jeremy Siegel, Professor at the Wharton School of the University of Pennsylvania, appeared on CNBC and said that despite the CPI report exceeding expectations, the Fed could cut rates by the end of this year. He said, "I see a stronger economy than four weeks ago. This means the Fed is less likely to cut rates quickly in the second half of the year," but still gave weight to the rate cut outlook.

In the New York bond market, Treasury yields rose as the CPI report was digested. The 2-year U.S. Treasury yield, sensitive to monetary policy, rose to around 4.61%. The 10-year yield also exceeded 3.75%. The 6-month yield surged to 5.02%, marking the highest level since July 2007.

The U.S. dollar value slightly declined. The Dollar Index, which measures the dollar's value against six major currencies, hovered around the 103 level.

International oil prices fell due to the U.S. government's plan to release Strategic Petroleum Reserves (SPR). On the New York Mercantile Exchange, March delivery West Texas Intermediate (WTI) crude oil closed at $79.06 per barrel, down $1.08 (1.35%) from the previous close.

Meanwhile, the protagonist of the 'Closing Bell' event at the New York Stock Exchange (NYSE) that day was NEOS, an asset management company established locally by the Korean fintech company WaveRidge. Since establishing NEOS in the U.S. last March, WaveRidge has successfully listed three option income-based ETFs (CSHI, BNDI, SPYI) on the U.S. stock market. To commemorate the closing bell, the NYSE exterior displayed the U.S. flag alongside the Taegeukgi.