[New York Stock Market] Strong Consumer Spending and Increased Tightening Concerns Despite Rise... Nasdaq Up 0.92%

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York Stock Exchange closed higher on the 15th (local time) despite rising concerns over tightening due to retail sales data exceeding expectations.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,128.05, up 38.78 points (0.11%) from the previous session. The S&P 500, focused on large-cap stocks, rose 11.47 points (0.28%) to 4,147.60, and the tech-heavy Nasdaq index closed at 12,070.59, up 110.45 points (0.92%).

The New York stock market, which started lower due to retail sales data for January surpassing market expectations, experienced volatility throughout the session before turning upward. Despite growing concerns over tightening due to strong economic indicators, investors appeared to focus more on the assessment that this situation signals a 'soft landing.' Ed Yardeni, CEO of Yardeni Research, appeared on CNBC and said, "The process of inflation decline is not smooth. It will be difficult to see rate cuts within the year," but he predicted a soft landing for the U.S. economy this year.

[Image source=Reuters Yonhap News]

Within the S&P 500, nine sectors excluding energy and healthcare stocks rose. Airbnb closed up 13.35% after news that it achieved its first annual profit last year. Roblox surged more than 26% as its quarterly bookings exceeded Wall Street expectations. Paramount Global jumped 9.31% following news that Berkshire Hathaway, led by Warren Buffett, expanded its stake. Tesla rose 2.38% amid reports of partial opening of electric vehicle chargers and upgrades to its Shanghai factory for new Model 3 production. Conversely, internet service company Credo Technology Group fell nearly 47% after it was revealed that its largest customer downgraded demand forecasts.

Investors focused on key indicators including January retail sales, the Federal Reserve's (Fed) interest rate hike path in response, and corporate earnings. According to the U.S. Department of Commerce, January retail sales increased by 3% compared to the previous month, exceeding market expectations (1.9%) by more than 1 percentage point. Last month's retail sales marked the largest increase in 22 months since March 2021, contrasting with the consecutive 1% declines in November and December last year. Core retail sales, excluding gasoline and automobiles, also rose 2.6% from the previous month, showing the largest increase in nearly two years.

Following the January employment report and January Consumer Price Index (CPI), consumption?which accounts for two-thirds of the U.S. real economy?also exceeded market expectations. With inflation not falling as quickly as expected and strong employment and consumption, the likelihood that the Fed will maintain higher interest rates for a longer period has increased.

Ollen Klachin of Oxford Economics evaluated, "These indicators support their view that additional rate hikes are necessary to cool the economy and bring inflation down to the 2% target." Mark Heffel, Chief Investment Officer at UBS Global Wealth Management, said, "The Fed may have more work to do to curb inflation," adding, "The latest data suggest it is too early to expect a dovish pivot."

According to financial information provider FactSet, the market's expected benchmark interest rate is 5.28% in August. Investors, who were optimistic about a final rate level of 4.9% earlier this month, have now turned more hawkish than the Fed's dot plot forecast (5.1% by year-end). The current U.S. benchmark interest rate is 4.5?4.75%.

The New York bond market also reacted sensitively. The 10-year U.S. Treasury yield surpassed 3.8% on the day. The 2-year Treasury yield, sensitive to monetary policy, also exceeded 4.6% following the CPI and retail sales announcements.

The U.S. dollar also showed strength. The Dollar Index, which measures the dollar's value against six major currencies, rose more than 0.5% from the previous session to 103.8.

Other indicators released on the day showed improvement compared to before. Industrial production in January turned positive after three months of decline. However, on a seasonally adjusted basis, it remained at the same level as the previous month and fell short of market expectations. The Empire State Index for February, which reflects manufacturing activity in New York State, recorded -5.8, marking the third consecutive month in negative territory but rising 27.1 points from the previous month.

Investors are closely watching upcoming remarks from Fed officials to predict the monetary policy path at the March FOMC meeting. Corporate earnings announcements are also ongoing. This week, Zillow, SoFi, and DoorDash are scheduled to report earnings. So far, about three-quarters of S&P 500 companies have reported earnings, with 69% exceeding profit forecasts. However, this is lower than the recent three-year average of 79%.

Chris Zaccarelli, Chief Investment Officer (CIO) of Independent Advisor Alliance, said, "The resilience of the labor market is the main reason consumption continues, and inflation will remain stubbornly high in this environment," forecasting "significant volatility in the market."

Oil prices fell on news of a sharp increase in U.S. crude oil inventories. On the New York Mercantile Exchange, March delivery West Texas Intermediate (WTI) crude closed at $78.59 per barrel, down 47 cents (0.59%) from the previous day.