[New York Stock Market] Declines Awaiting FOMC... Instacart Rises 12% on Debut

The three major indices of the U.S. New York stock market closed lower in a narrow range on the 19th (local time) as investors awaited the results of the Federal Reserve's Federal Open Market Committee (FOMC) meeting. Amid concerns over tightening, Treasury yields rose. The 2-year yield, which is sensitive to monetary policy, surpassed 5.1% intraday, marking the highest level since 2006.

On the day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 34,517.73, down 106.57 points (0.31%) from the previous session. The large-cap S&P 500 index fell 9.58 points (0.22%) to 4,443.95, while the tech-heavy Nasdaq index dropped 32.05 points (0.23%) to 13,678.19.

Within the S&P 500, nine sectors declined except for healthcare and telecommunications stocks. Walt Disney announced it would spend $60 billion over the next decade to expand its theme parks and cruise line businesses, causing its shares to fall 3.62% from the previous close. Amazon fell 1.68%, Nvidia 1.01%, and Intel 4.34%. Starbucks dropped more than 1.5% after TD Cowen downgraded its rating due to concerns originating from China. Arm, which was listed last week, also fell about 5%. On the other hand, Instacart, which was listed on the Nasdaq that day, rose 12.33%. The leading cruise stocks Carnival and Royal Caribbean Group rose 0.33% and 2.5%, respectively, after Truist upgraded their investment ratings.

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Investors showed caution as they monitored the two-day FOMC meeting starting that day, Instacart’s listing, movements in international oil prices, and the Treasury market. The current market 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, as of that morning, federal funds futures priced in over a 99% probability that the Fed will keep rates unchanged in September.

Accordingly, investors’ attention is focused on the Fed’s new dot plot, economic outlook, and Chairman Powell’s remarks. This FOMC meeting is particularly notable as it follows the recent rise in oil prices, which was clearly reflected in the U.S. August Consumer Price Index (CPI) and other inflation indicators, 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, central banks of Brazil, Indonesia, Japan, Norway, South Africa, Sweden, Switzerland, Taiwan, and the United Kingdom are also holding monetary policy meetings.

Chris Fasiano, portfolio manager at Commonwealth Financial Network, said, "Ahead of the FOMC results, the market is taking a breather and waiting to see what will be said next." Kevin Gordon, chief investment strategist at Charles Schwab, noted, "We know we are closer to the end than the beginning of the rate hike cycle," adding, "How the Fed views next year is important." Some expect that the slowdown in consumption will soon be confirmed in economic data. 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 being depleted, and many young Americans face student loan repayments, so consumption is expected to slow."

Oil prices initially rose due to concerns over supply shortages in the fourth quarter but later reversed to decline. On the New York Mercantile Exchange, October West Texas Intermediate (WTI) crude oil closed at $91.20 per barrel, down 28 cents (0.31%) from the previous session. The decline is attributed to profit-taking after a rapid short-term surge. David Fyfe, chief economist at Argus Media, said the recent rise in oil prices "clearly poses a slight risk of pushing inflation higher" and "could support further rate hikes through the end of the year."

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Investors also watched the listing of Instacart, a grocery delivery company dubbed the "U.S. version of Market Kurly." Instacart closed its first trading day more than 12% above its IPO price of $30. Following last week's successful debut of British semiconductor design firm Arm, Instacart’s strong first-day performance is seen as adding momentum to the previously frozen initial public offering (IPO) market. However, this is still below the intraday peak, which rose more than 40%. Arm, which debuted on the Nasdaq last week, surged 25% on its first day, confirming strong investor interest, but its stock price has since declined. The market is now focusing on the upcoming IPO of Klaviyo, scheduled for the next day, which will set its offering price that day.

The U.S. August housing starts data released that day showed the lowest level in over three years due to burdens from high mortgage rates. According to the Department of Commerce, housing starts in August fell 11.3% month-over-month to 1.283 million units, significantly below market expectations and the lowest since June 2020.

In the New York bond market, Treasury yields rose. The benchmark 10-year Treasury yield hovered around 4.36%, while the 2-year yield, sensitive to monetary policy, stood at 5.09%. The 2-year yield briefly exceeded 5.1% intraday, the highest since 2006. The 10-year yield also approached its highest level since 2007. The dollar index, which measures the dollar’s value against six major currencies, traded around 105.0, down about 0.1% from the previous session.

Additionally, the simultaneous strike by the Big Three automakers organized by the United Auto Workers (UAW) is cited as a factor that could negatively impact the economic situation. 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 gone on strike simultaneously.