New York Stock Market Dips Early Amid FOMC and Instacart IPO Watch

The three major indices of the U.S. New York stock market showed a downward trend on the 19th (local time) as they awaited the results of the Federal Reserve's Federal Open Market Committee (FOMC) meeting.

At around 10:09 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average, which focuses on blue-chip stocks, was trading at 34,464, down 160.13 points (0.46%) from the previous session. The S&P 500, centered on large-cap stocks, was down 22.66 points (0.51%) at 4,430, and the Nasdaq, focused on technology stocks, was trading at 13,607, down 102.07 points (0.75%).

Currently, all 10 sectors of the S&P 500, except for energy-related stocks, are declining. Walt Disney announced it would spend $60 billion over the next 10 years to expand its theme parks, cruise lines, and other businesses, causing its stock to fall more than 3% from the previous session. Starbucks dropped more than 2% after TD Cowen downgraded its rating due to concerns from China. Deere & Company also saw nearly a 3% decline as Evercore ISI lowered its target price. Rocket Lab fell more than 7% following the failure of its 41st Electron rocket launch. Major tech stocks such as Amazon, Intel, and Tesla were also weak, falling 2.19%, 1.26%, and 0.56%, respectively. Arm, which was listed last week, also dropped about 5%. On the other hand, energy stocks including Chevron showed gains. Leading cruise stocks Carnival and Royal Caribbean Group rose 1.66% and 2.91%, respectively, after Truist upgraded their investment ratings.

[Image source=AFP Yonhap News]

Investors are showing caution as they monitor the two-day FOMC meeting starting today, Instacart's listing, movements in international oil prices, and the bond market. The market currently expects the Fed to maintain the current interest rate of 5.25-5.5% but deliver a hawkish message through the newly released dot plot and Chairman Jerome Powell's press conference. According to the CME FedWatch tool, federal funds futures markets are pricing in over a 99% chance that the Fed will keep rates unchanged in September.

Accordingly, investors' attention is focused on the new dot plot and Chairman Powell's remarks. This FOMC meeting is held shortly after the recent rise in 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. The remaining FOMC meetings this year are scheduled for September, November, and December.

This week, besides the Fed, Brazil, Indonesia, Japan, Norway, South Africa, Sweden, Switzerland, Taiwan, and the United Kingdom are also holding monetary policy meetings. These countries will announce their monetary policy decisions within 36 hours after the Fed's policy statement release at 2 p.m. Eastern Time on the 20th.

Sam Stovall, Chief Investment Strategist at CFRA Research, conveyed the mood, saying, "(Global investors) are anxious to see what actions central banks will take." Joseph Gafoglio, President of America Capital Management, said, "The Fed is still focused on engineering a soft landing for the U.S. economy," adding, "Although consumer spending was strong throughout the summer, excess savings accumulated during the pandemic are depleting, and many young Americans face student loan repayments, so consumption is expected to slow down."

Following last week's Arm, Instacart will begin trading on the New York stock market today. Instacart's IPO price is set at $30 per share, and the market believes that investor interest in the upcoming Klaviyo IPO, scheduled for the next day, will depend on Instacart's success. Klaviyo is expected to set its IPO price today, having previously indicated a range of $27 to $29 per share.

Oil prices continue to rise today amid concerns over supply shortages in the fourth quarter. West Texas Intermediate (WTI) crude oil is trading above $92 per barrel, more than 1% higher than the previous session. If this trend continues, it will mark the fourth consecutive day of gains and likely set a new yearly high. Brent crude is also up about 0.8%, trading around $95 per barrel. Earlier, Citigroup forecasted that Brent crude prices could surpass $100 per barrel within the year.

The Wall Street Journal (WSJ) reported, "Brent crude has risen on 13 of the last 16 trading days, and WTI has surged 29% this quarter alone," adding, "As Brent approaches $100 per barrel, it poses a new challenge to central banks fighting inflation and war." David Fyfe, Chief Economist at Argus Media, said, "There is clearly a risk of slightly higher inflation," and "This could support further rate hikes through the end of the year."

In the New York bond market, Treasury yields are rising. The benchmark 10-year Treasury yield is around 4.32%, while the 2-year yield, which is sensitive to monetary policy, stands at 5.07%. The dollar index, which measures the value of the U.S. dollar against six major currencies, is trading around 105.0, down about 0.1% from the previous session.

The U.S. August housing starts released today hit their lowest level in over three years due to the burden of high mortgage rates. According to the Department of Commerce, housing starts in August fell 11.3% from the previous month to 1.283 million units. This significantly missed market expectations and was the lowest level since June 2020.

The simultaneous strike by the Big Three automakers organized by the United Auto Workers (UAW) is also cited as a factor that could negatively impact the economy. The UAW leadership warned that if no progress is made in negotiations by this Friday, the strike currently limited to three plants in Michigan, Ohio, and Missouri will expand to other factories. The UAW began striking on the 15th after the expiration of the collective bargaining deadline. This is the first time since the UAW's founding in 1935 that the Big Three automakers have struck simultaneously.

European stock markets showed mixed results. Germany's DAX index fell 0.44%, and France's CAC index dropped 0.1%. The UK's FTSE index was trading slightly higher.