The three major indices of the U.S. New York Stock Exchange ended mixed and flat on the 31st (local time), ending a four-day rally. The personal consumption expenditures (PCE) price index, one of the inflation indicators, matched expectations but showed a slight increase from the previous month. The market took a breather and is waiting for the nonfarm payroll data to be released on the 1st of next month.
On this day, the Dow Jones Industrial Average closed at 34,721.91, down 168.33 points (0.48%) from the previous trading day.
The S&P 500 index, which focuses on large-cap stocks, also closed down 7.21 points (0.16%) at 4,507.66. In contrast, the tech-heavy Nasdaq index rose 15.66 points (0.11%) to close at 14,034.97.
Although the four-day rally throughout this week helped reduce some losses, the three major indices of the New York Stock Exchange could not avoid losses for the entire month of August. The Dow Jones Industrial Average fell 2.36%, while the S&P 500 and Nasdaq indices dropped 1.77% and 2.17%, respectively.
By stock, Salesforce rose 2.99% after reporting a surprise second-quarter earnings beat driven by cost-cutting. The company’s second-quarter revenue increased 11% year-over-year to $8.6 billion, surpassing the forecast of $8.53 billion. Adjusted earnings per share also exceeded expectations at $2.21 versus the anticipated $1.90. Dell rose 1.01%. Nvidia showed a slight gain of 0.18%, closing slightly higher.
The U.S. stock market focused on the PCE price index released by the Department of Commerce on this day. According to the Commerce Department’s data, the July PCE price index rose 3.3% year-over-year, a slight increase from the previous month’s 3.0%. The core PCE price index, closely watched by the Federal Reserve (Fed), rose 4.2% year-over-year, also slightly higher than June’s 4.1%. All figures were in line with expert expectations. Given the significant slowdown in June’s increase, it was assessed that the inflation easing trend has not reversed. However, the rise in both PCE and core PCE prices from the previous month suggests that inflation pressures have not been fully extinguished.
Bloomberg News analyzed, "The eased inflation figures highlight the progress the Fed has made over the past year in reducing price pressures," but added, "However, the central bank still has a long way to go before declaring victory. Strong consumer spending poses new concerns for policymakers aiming to continuously extinguish inflation."
Additional data is needed for the Fed to declare an end to tightening. Accordingly, investors’ attention is focused on the nonfarm payroll data to be released on the 1st of next month.
The yield on the U.S. 10-year Treasury note was 4.108% at 4:48 p.m. on this day, down 1.0 basis point (1 bp = 0.01%) from the previous trading day.
Joseph Kusik, Senior Vice President at Calamos Investments, said, "The important thing is that stocks are following bonds, so the continued decline in Treasury yields provides a foundation for stocks to have more upside potential," and predicted, "If there is no surprising result in the August nonfarm payroll report to be released on Friday, a liquidity environment will begin to form ahead of the Labor Day holiday."
According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on the morning of this day reflected an 89.0% probability that the Federal Open Market Committee (FOMC) meeting on September 14 will keep the Fed funds rate steady at 5.25?5.50%. The probability of a rate hike to 5.50?5.75% was 11.0%.
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