[New York Stock Market] Mixed Close Awaiting CPI... Nasdaq Down 0.43%

The three major indices of the U.S. New York stock market closed mixed on the 11th (local time) near the flat line. Investors appeared to be waiting for this week's scheduled announcements, including inflation indicators such as the Consumer Price Index (CPI), which could impact the Federal Reserve's (Fed) interest rate decisions, as well as earnings reports mainly from large banks.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,684.79, up 98.27 points (0.29%) from the previous session. The large-cap-focused S&P 500 index closed slightly down by 0.17 points (0.0%) at 4,108.94, while the tech-heavy Nasdaq index fell 52.48 points (0.43%) to close at 12,031.88.

Within the S&P 500, nine sectors excluding technology and communication stocks rose across the board. Major tech stocks such as Microsoft (-2.27%), Apple (-0.77%), Amazon (-2.20%), and Google Alphabet (-1.02%) showed a downward trend. CarMax closed up 9.64% from the previous session, buoyed by quarterly earnings that exceeded expectations. Moderna fell more than 3% following its announcement to delay the flu vaccine. Tilray dropped over 8% after its quarterly earnings missed expectations.

[Image source=Reuters Yonhap News]

Investors showed caution as they awaited the release of the March CPI and the March Federal Open Market Committee (FOMC) minutes starting the next day. The March CPI inflation rate is expected to rise 5.1% year-over-year, down from 6% the previous month to the 5% range. The market is particularly focused on the still sticky core inflation.

The March FOMC minutes attract attention as it was the first FOMC meeting following the Silicon Valley Bank (SVB) collapse. Investors are keen to understand the rationale behind the Fed's decision to raise the benchmark interest rate by 0.25 percentage points despite rising concerns about a banking crisis, as well as the Fed's economic assessment. This week also includes scheduled releases such as the Producer Price Index (PPI).

William Northday of US Bank Wealth Management said, "The indicators coming out this week are important as they are among the last data points before the May FOMC," adding, "The market is leaning toward an additional rate hike at the next meeting." Casey Buchanan, Chief Portfolio Manager at Globalt Investments, assessed, "The market is saying the tightening peak has already passed, and now the data needs to confirm this outlook."

According to the Chicago Mercantile Exchange (CME) FedWatch, as of the afternoon, the federal funds futures market reflects over a 71% probability that the Fed will implement a 0.25 percentage point 'baby step' rate hike at the May FOMC. The probability of a rate hold has dropped from the mid-50% range a week ago to the high 20% range.

John Williams, President of the New York Federal Reserve Bank and the Fed's third-ranking official, said in an interview with Yahoo Finance, "We need to act based on the data," explaining, "One thing we are watching is credit conditions, but we are also looking for signals that inflation is easing." Austin Goolsby, President of the Chicago Fed, confirmed he is monitoring the situation, stating, "We are trying to address questions about credit ahead of the May meeting."

The International Monetary Fund (IMF) lowered its global economic growth forecast for this year by 0.1 percentage points to 2.8% in its World Economic Outlook (WEO) report released on the same day. The IMF noted that inflation remains high and that financial risks have increased due to high-intensity monetary tightening and events like the SVB collapse, leading to greater uncertainty surrounding the global economic outlook.

Pierre-Olivier Gourinchas, IMF Chief Economist, stated, "The global economy is gradually recovering from the COVID-19 pandemic and the effects of Russia's invasion of Ukraine, and China's reopened economy is rebounding strongly," but added, "Recent instability surrounding the banking crisis reminds us that the situation remains fragile. Downside risks still dominate, and the fog around the global economic outlook has thickened." He also mentioned the possibility that if the worst-case scenario materializes, global economic growth could slow to as low as 1% this year.

However, U.S. Treasury Secretary Janet Yellen assessed that the global economy is in a better position than forecast last fall, as energy and food prices stabilize and supply chain disruptions continue to improve. While she remains cautious about global downside risks, she expressed optimism, saying it is better not to be overly negative. Regarding the SVB collapse, she emphasized, "The U.S. banking system is sound and has sufficient capital and liquidity." She added, "Although risks remain, we are not expecting a recession," and noted that there is no evidence yet that credit tightening is cooling U.S. economic activity.

Later this week, earnings reports from major banks such as JPMorgan Chase, Citi, and Wells Fargo are scheduled. As these are the first quarterly earnings announcements following the SVB incident, key points of interest include the impact of small and mid-sized bank failures on the banking sector as a whole, and what messages management will convey regarding future lending regulations and credit tightening. Buchanan commented, "This earnings season will be interesting as it will reveal how large financial institutions view the current threats, considering the SVB incident last month and already tightened lending standards."

In the New York bond market on this day, Treasury yields moved at levels similar to the previous session as investors awaited inflation data. The 10-year U.S. Treasury yield stood around 3.42%, and the 2-year Treasury yield was near 4.0%. The U.S. Dollar Index, which measures the dollar's value against six major currencies, traded down about 0.4% to around 102.1. Bitcoin, a representative cryptocurrency, surpassed $30,000 for the first time since June 2020.

International crude oil prices rose. At the New York Mercantile Exchange, May delivery West Texas Intermediate (WTI) crude oil closed at $81.53 per barrel, up $1.79 (2.24%) from the previous session. This closing price is the highest since January 23.