[New York Stock Market] Expected Interest Rate Hike, Mixed Close Amid Ambiguous Powell... Dow Up for 13 Consecutive Trading Days

The three major indices of the U.S. New York stock market closed mixed on the 26th (local time) as they digested the Federal Open Market Committee (FOMC) regular meeting results, which raised the benchmark interest rate by 0.25 percentage points, and remarks by Jerome Powell of the Federal Reserve (Fed). The Dow Jones Industrial Average, composed of blue-chip stocks, continued its upward trend for the 13th consecutive trading day.

On this day at the New York Stock Exchange (NYSE), the Dow closed at 35,520.12, up 82.05 points (0.23%) from the previous session. This marks the 13th consecutive day of gains, the longest rally since 1987. Meanwhile, the S&P 500, which focuses on large-cap stocks, closed down 0.71 points (0.02%) at 4,566.75, and the tech-heavy Nasdaq closed down 17.27 points (0.12%) at 14,127.28.

Within the S&P 500, stocks related to communications, finance, industrials, real estate, and consumer staples rose, while those related to technology, materials, utilities, healthcare, and energy declined. Alphabet (Google) posted better-than-expected earnings after the previous day's close, rising 5.78% by the end of trading. Microsoft (MS) fell nearly 4% after lowering its earnings guidance. Boeing reported earnings that exceeded expectations and closed up 8.72%. PacWest Bancorp rebounded nearly 27% after falling in the previous regular session following a Wall Street Journal (WSJ) report that California Bank had entered acquisition talks. The SPDR S&P Regional Banking ETF rose nearly 5%.

[Image source=Reuters Yonhap News]

Investors closely watched the FOMC regular meeting results and Powell’s subsequent press conference in the afternoon. The Fed raised the interest rate by 0.25 percentage points from the previous 5.0?5.25% range to 5.25?5.5%. As a result, the U.S. benchmark interest rate surged to its highest level since 2001. This marks a resumption of rate hikes just one month after a pause for a "breather."

The decision for a baby step hike was unanimous. Since this outcome had been widely anticipated by the market, investors’ attention shifted to the Fed’s moves after the next meeting in September. At the afternoon press conference, Powell left open both the possibility of a rate hike and a pause in September. When asked about the possibility of holding rates steady in September, he said, "No decisions have been made regarding future meetings, including the pace of rate hikes," adding, "If supported by data, it is possible to raise rates at the September meeting. It is also possible to maintain rates depending on the data." With many key economic indicators scheduled to be released over the roughly two months until the next FOMC meeting, the Fed plans to base its decision on the data at that time.

There are only three remaining FOMC meetings this year?in September, November, and December?with the next meeting scheduled for September 19?20. The market had been optimistic that the Fed’s tightening cycle might end early after one more hike this month, given clear signs of easing inflation indicators, including the recent Consumer Price Index (CPI).

While leaving the door open for future hikes, Powell’s remarks, which were less hawkish than expected, led the market to describe him as "neither hawkish nor dovish." Independent Advisor Alliance commented, "Both bulls and bears found something to like in Powell’s remarks." Quincy Crosby of LPL Financial noted the possibility of additional hikes but described the tone of the policy statement as neutral rather than hawkish or dovish.

Francis Donald, Global Chief Economist at Manulife Investment, said, "The Fed remains in a prolonged 'hawkish hold' state," adding, "Powell has no choice but to maintain the threat of rate hikes to prevent the market from prematurely expecting cuts and causing inflation expectations to rise."

This week, the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, will also be released. The core PCE price index is expected to have risen 4.2% year-over-year, down from 4.6% the previous month. Major companies continue to report earnings. Both MS and Alphabet reported earnings that exceeded market expectations the previous day, but MS’s stock declined due to guidance falling short of Wall Street’s expectations. After the market close today, Meta Platforms and Chipotle are reporting earnings. Meta’s Q2 earnings per share were $2.98, surpassing the $2.91 consensus compiled by Refinitiv. Meta’s stock closed up 1.39% in regular trading and is currently up nearly 5% in after-hours trading.

In the New York bond market, Treasury yields declined. The yield on the 10-year U.S. Treasury note hovered around 3.86%, while the 2-year Treasury yield, sensitive to monetary policy, was around 4.84%. The Dollar Index, which measures the dollar’s value against six major currencies, fell nearly 0.4% to 100.9.

Oil prices declined. On the New York Mercantile Exchange, September delivery West Texas Intermediate (WTI) crude oil closed at $78.78 per barrel, down 85 cents (1.07%) from the previous session.