[New York Stock Market] Mixed Trends Amid Easing Tightening Concerns... Nasdaq Down 0.58%

[Asia Economy New York=Special Correspondent Joselgina] Major indices of the U.S. New York stock market showed mixed trends on Friday, the 27th (local time), as they digested high inflation and concerns over the Federal Reserve's (Fed) tightening.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,826.69, up 129.84 points (0.39%) from the previous session. The large-cap S&P 500 index closed down 11.32 points (0.28%) at 4,079.09, and the tech-heavy Nasdaq index ended the day at 11,787.27, down 68.56 points (0.58%).

Weekly performance also showed mixed results. The Dow fell 0.13%, marking its first three-week losing streak since September last year. The Nasdaq rose 0.59%, while the S&P 500 declined 0.28%. Art Hogan, Chief Market Strategist at B. Riley, said, "There is a contentious tug-of-war between the stock and bond markets," adding, "The bond market signals that the Fed will keep interest rates higher for an extended period, but the stock market is ignoring this and looking for a soft landing signal."

[Image source=Reuters Yonhap News]

On this day, energy, technology, and materials stocks within the S&P 500 showed weakness. The decline in oil prices for four consecutive trading days led to a notable drop in energy stocks. In contrast, consumer staples and healthcare stocks recorded gains.

By individual stocks, ExxonMobil fell 3.85% from the previous session. Other major energy stocks such as Devon Energy (-4.29%), Chevron (-2.23%), and Occidental Petroleum (-2.83%) also declined together. Meta rose 0.26% amid reports of imminent additional restructuring. Agricultural machinery maker Deere surged 7.53% after raising its annual guidance. Airbnb slipped more than 8% just one day after a double-digit surge due to strong earnings.

Investors showed caution as they digested heightened monetary tightening concerns following recently released Consumer Price Index (CPI) and Producer Price Index (PPI) data. Fed Governor Michelle Bowman said in a speech that day, "There is a long way to go before inflation reaches the 2% target," and "We must continue raising rates until more progress is confirmed." This added to hawkish remarks from Loretta Mester, President of the Cleveland Federal Reserve Bank, and James Bullard, President of the St. Louis Federal Reserve Bank, who had opened the possibility of a 0.5% rate hike the day before.

According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) futures market currently prices in more than an 18% chance of a big step rate hike in March. While bets on a baby step (0.25% rate increase) still dominate, this is higher compared to about 9% just a week ago.

With recent employment, inflation, and consumption data all exceeding expectations, concerns are rising in the market that the Fed's tightening may last longer than anticipated. Bank of America (BoA) also expects the Fed to raise rates by 0.25% each in March, May, and June due to these strong indicators. If so, U.S. interest rates would rise to 5.25%?5.5% by June, significantly exceeding the Fed's median year-end rate forecast of 5.1% from the December dot plot.

Amid concerns over prolonged inflation, import prices released that day showed a decline for the seventh consecutive month. The January import price index fell 0.2% from the previous month.

In the New York bond market that day, government bond yields showed volatility. They surged sharply during the session on Fed tightening expectations but then turned downward again. Early in the session, 10-year and 2-year Treasury yields rose to their highest levels since November last year. Later, the 2-year Treasury yield, which is sensitive to monetary policy, stabilized around 4.62% near the New York stock market closing time, similar to the previous day. The New York financial market is scheduled to be closed next Monday, the 20th, for Presidents' Day.

Investors are now expected to seek hints about the economic outlook from the remaining corporate earnings reports. Home Depot and Walmart are scheduled to release earnings next week.

Oil prices fell for the fourth consecutive trading day. On the New York Mercantile Exchange, March delivery West Texas Intermediate (WTI) crude oil closed at $76.34 per barrel, down $2.15 (2.74%) from the previous session. On a weekly basis, it declined 4.24%.