[New York Stock Market] "Let's Watch the FOMC" Cautious Market... Closes Slightly Higher

The three major indices of the U.S. New York stock market closed slightly higher on Monday, the 18th (local time), ahead of this week's scheduled Federal Reserve (Fed) Federal Open Market Committee (FOMC) meeting.

On the New York Stock Exchange (NYSE) that day, the blue-chip-focused Dow Jones Industrial Average closed at 34,624.30, up 6.06 points (0.02%) from the previous session. The large-cap-focused S&P 500 index rose 3.21 points (0.07%) to 4,453.53, and the tech-heavy Nasdaq index ended the day at 13,710.24, up 1.9 points (0.01%).

Within the S&P 500, energy, technology, communication, and financial stocks rose, while consumer discretionary, real estate, health care, and materials sectors declined. Apple, the largest by market capitalization, rose 1.69% as Goldman Sachs and Morgan Stanley presented optimistic forecasts for demand for the new iPhone. Major energy stocks such as ExxonMobil, Chevron, Valero Energy, and Marathon Petroleum also rose in unison amid continued oil price gains.

On the other hand, Moderna plunged more than 9% after co-founder Noubar Afeyan sold 15,000 shares. Semiconductor design company Arm, which surged nearly 25% on its Nasdaq debut last week, fell nearly 5%. Tesla also dropped more than 3% after Goldman Sachs lowered its annual net income estimates. As the United Auto Workers (UAW) simultaneous strike of the Big Three automakers continued, Ford's stock price fell more than 2%. Stellantis and General Motors also declined by 1.6% and 1.8%, respectively.

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Investors are showing caution while awaiting this week's scheduled FOMC. Quincy Crosby, Chief Global Strategist at LPL Financial, said, "How the Fed announces a rate pause is very important for the rate outlook in November and December," adding, "Whether the tone is dovish or hawkish is the most critical issue in the financial markets." Stephanie Lang, Chief Investment Officer (CIO) at Homrich Berg, also said, "We are at a moment of watching and waiting to see what kind of forward guidance we receive from the Fed."

The Fed is expected to maintain the current interest rate of 5.25-5.5% at the September FOMC meeting on the 19th-20th, but deliver a hawkish message through the newly released dot plot and Chairman Jerome Powell's press conference. According to the CME FedWatch tool, the federal funds futures market is pricing in more than a 99% chance of a rate hold in September as of that afternoon.

This FOMC is particularly notable as it is held right after the recent rise in crude oil prices was clearly reflected in U.S. inflation indicators such as the August Consumer Price Index (CPI), drawing attention to the Fed's assessment of oil-driven inflation concerns. With inflation worries resurfacing, there is also a possibility that tightening warnings could be stronger than expected. A survey released the previous day by the University of Chicago Booth School of Business and others showed that about half of economists expect more than two additional rate hikes. There are three remaining FOMC meetings this year: September, November, and December.

Greg McBride, analyst at Bankrate, said, "Inflationary pressures are easing, but there is a risk that oil prices could rise further," adding, "The Fed cannot yet declare victory." He predicted that "the Fed will remain cautious because easing financial conditions could hinder their goals even after rate hikes end," and that due to a stronger-than-expected economy and a slower-than-expected decline in inflation, interest rates may remain elevated for a longer period.

Oil prices rose again on concerns over supply shortages in the fourth quarter. On the New York Mercantile Exchange, October delivery West Texas Intermediate (WTI) crude closed at $91.48 per barrel, up 71 cents (0.78%) from the previous session. This marks the third consecutive day of gains and the highest closing price since November 7. Brent crude also rose more than 50 cents (0.5%) to $94.43 per barrel. Citigroup forecasted that Brent crude prices could surpass $100 per barrel within the year.

In the New York bond market, the benchmark 10-year Treasury yield hovered around 4.30%, while the 2-year yield, sensitive to monetary policy, stood at 5.06%. The dollar index, which measures the value of the U.S. dollar against six major currencies, traded around 105.1, down about 0.2% from the previous session.

Sam Stovall, Chief Investment Strategist at CFRA Research, said, "Investors will be closely watching the Fed as well as central banks in Japan, Switzerland, and Sweden this week," adding, "They are anxious to see what actions central banks will take." He also noted that the UAW strike is based on the broader issue of production stoppages in the U.S., diagnosing that 'strike' and 'wage increases' are dominating investors' thoughts.