[New York Stock Market] Rising Ahead of FOMC... Dow's 11th Consecutive Trading Day Rally

The three major indices of the U.S. New York stock market all closed higher on the 24th (local time), as investors awaited the Federal Reserve's (Fed) upcoming benchmark interest rate decision this week and earnings reports from major companies including Google Alphabet and Microsoft (MS). Amid growing expectations that the Fed's tightening cycle is nearing its end, the Dow Jones Industrial Average, composed of blue-chip stocks, extended its winning streak to 11 consecutive trading days.

On the New York Stock Exchange (NYSE) that day, the Dow closed at 35,411.24, up 183.55 points (0.52%) from the previous session. This marked its 11th consecutive day of gains, the longest rally since 2017. The large-cap-focused S&P 500 index rose 18.30 points (0.40%) to 4,554.64, while the tech-heavy Nasdaq index gained 26.06 points (0.19%) to close at 14,058.87.

Within the S&P 500, nine of the 11 sectors rose, excluding utilities and healthcare-related stocks. Energy and financial stocks notably jumped more than 1%. Chevron rose nearly 2% after releasing preliminary earnings that exceeded Wall Street expectations ahead of its final report. AMC Entertainment's shares surged about 33% after a court dismissed a settlement plan related to converting preferred shares into common stock. Mattel, famous for Barbie dolls, gained nearly 2% following news that the movie 'Barbie' topped the North American box office after its release last weekend. IMAX rose nearly 3% as audiences increased for the new film 'Oppenheimer.' Tesla climbed 3.48% despite UBS downgrading its investment rating. Nvidia rose 0.68%, and Google Alphabet increased by 1.26%.

[Image source=Reuters Yonhap News]

Investors are focused on major upcoming events this week, including the July Federal Open Market Committee (FOMC) meeting, earnings reports from big tech and other major companies, and economic data releases. Particularly, as inflation concerns have eased recently, expectations for a soft landing have grown, along with speculation that the Fed may end its tightening cycle early after this month's rate hike. Unlike the Fed's earlier dot plot signaling two rate hikes this year, the market currently views a scenario where a single additional hike this month concludes the Fed's tightening cycle as the most likely.

According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds (FF) futures market currently prices in a 98.9% probability that the Fed will raise rates by 0.25 percentage points at the FOMC meeting on the 25th-26th. This would set the U.S. benchmark interest rate at 5.25-5.5%. The likelihood that the Fed will hold rates steady at the next meeting in September is priced at about 81%. However, the Wall Street Journal (WSJ) reported concerns from Fed officials that the recent easing of inflation might be 'transient.' The WSJ noted, "Fed officials remain worried about whether wages and inflation can slow sufficiently without a recession."

Consequently, investor attention is focused on Fed Chair Jerome Powell's remarks. With about two months between this week's FOMC and the September meeting, the key will be any clues Powell provides during the press conference on the afternoon of the 26th. Later in the week, the Personal Consumption Expenditures (PCE) price index, the Fed's preferred inflation gauge, will be released. The core PCE price index is expected to have risen 4.2% year-over-year, down from 4.6% the previous month. If the PCE price index surprises to the upside, inflation concerns around the Fed's tightening could rise again. Other data releases this week include the preliminary U.S. second-quarter Gross Domestic Product (GDP), June durable goods orders, and the July University of Michigan consumer sentiment index. On the 25th, the International Monetary Fund (IMF) will also release its revised World Economic Outlook report.

The July survey by the National Association for Business Economics (NABE) also confirmed economic optimism. More than 7 out of 10 (71%) of the participating corporate economists forecast less than a 50% chance of a recession within the next 12 months. This marks a significant improvement compared to the April survey, where responses were evenly split on the likelihood of a recession. Carlos Herrera, NABE survey chair and senior economist at Coca-Cola North America, explained, "The majority of respondents are more confident about the economy next year because they see a reduced risk of recession."

Economic indicators showed mixed results. The S&P Global July Manufacturing Purchasing Managers' Index (PMI) came in at 49.0, exceeding both market expectations and the previous month's figure. Conversely, the Services PMI fell to 52.4, its lowest in five months, missing both the prior month and forecast. On the same day, the Chicago Federal Reserve Bank's June National Activity Index (NAI) recorded -0.32, marking two consecutive months of negative readings.

The corporate earnings season continues. Alphabet, MS, General Electric (GE), General Motors (GM), Coca-Cola, McDonald's, Ford Motor Company, Intel, and ExxonMobil are among the companies scheduled to report second-quarter results. According to FactSet, about 18% of S&P 500-listed companies have reported earnings so far, with 60% beating revenue expectations. The Nasdaq 100 index also underwent a special rebalancing that day. This rebalancing was triggered because the combined weight of stocks with more than 4.5% weighting?such as Apple, MS, Alphabet, Nvidia, and Tesla?exceeded the 40% cap.

In the New York bond market, Treasury yields rose. The 10-year U.S. Treasury yield hovered around 3.87%, while the 2-year Treasury yield, sensitive to monetary policy, traded near 4.91%. The Dollar Index, which measures the dollar's value against six major currencies, rose more than 0.3% to about 101.4.

International oil prices increased amid supply shortage concerns. On the New York Mercantile Exchange, September delivery West Texas Intermediate (WTI) crude oil closed at $78.74 per barrel, up $1.67 (2.17%) from the previous session.