[New York Stock Market] Slight Gains Despite Rising Treasury Yields and Shutdown Concerns

The three major indices of the U.S. New York stock market closed slightly higher on Monday, September 25 (local time), the last Monday of September, despite rising Treasury yields and concerns over a federal government shutdown.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average, centered on blue-chip stocks, closed at 34,006.88, up 43.04 points (0.13%) from the previous session. The S&P 500, focused on large-cap stocks, rose 17.38 points (0.4%) to 4,337.44, and the tech-heavy Nasdaq index closed at 13,271.32, up 59.51 points (0.45%).

All sectors in the S&P 500 except real estate, utilities, and consumer staples rose. Amazon rose more than 1.6% after announcing a $4 billion investment plan in AI company Anthropic. Nvidia, which has been leading the AI rally, also jumped nearly 1.5%. On the other hand, 3M fell more than 2%, dragging down the Dow.

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Investors showed caution, closely watching Treasury yields, the dollar, oil movements, and the possibility of a U.S. federal government shutdown. In the New York bond market, the 10-year U.S. Treasury yield surpassed 4.54%, marking the highest level since 2007. The 2-year yield also exceeded 5.12%. The dollar index, which measures the value of the dollar against six major currencies, approached the 106 level.

Jay Hartfield, CEO of Infrastructure Capital Management, said, "Yields are very negative (for the stock market), and AI is very positive," adding, "These two factors are conflicting in the middle, so the stock market is struggling to find direction."

Currently, the risk of a U.S. federal government shutdown is also rising. To prevent a shutdown, the budget must be passed before October 1, when the 2024 fiscal year begins. However, hardliners within the Republican majority in the House, who hold the authority to review the budget bill, are demanding large cuts, and the deadlock has not been resolved with only a few days left before the deadline.

Moody's, one of the world's three major credit rating agencies, warned in a report on the same day that a shutdown would negatively impact the U.S. national credit rating. The report expressed concern that "the deepening fiscal deficit and deteriorating debt repayment capacity are weakening fiscal soundness, while increasing political polarization is imposing significant constraints on fiscal policy decisions." This political conflict was also cited as a major reason by Fitch, another credit rating agency, when it downgraded the U.S. national credit rating from AAA to AA+ last month. Moody's remains the only one among the three major credit rating agencies to maintain the U.S. national credit rating at the highest level (Aaa).

Warnings about the economic burden of a shutdown have also come from within the U.S. Congress. According to the Congressional Research Service (CRS) 'Shutdown Impact Report,' goods and services provided by the federal government account for about 7% of GDP. The extent to which these goods and services are not provided could directly reduce GDP. The report warned, "The indirect damage from reduced spending is much broader than the direct impact of the shutdown," adding, "Government employees who do not receive timely paychecks are likely to reduce consumption."

This week, remarks from Federal Reserve (Fed) officials and major economic data releases are expected. Austan Goolsbee, president of the Chicago Fed and considered a representative dove within the Fed, appeared on CNBC's Squawk Box on this day and said, "The Fed is approaching a point where it can maintain rates steadily." He added, "We are approaching a point where how long rates are held is more important than how high they go."

Fed Chair Jerome Powell will speak at an online town hall meeting on the 28th. John Williams, president of the New York Fed and considered the third most influential Fed official, will speak on the 29th. Additionally, the Conference Board Consumer Confidence Index for September, the final GDP figures for Q2, Personal Consumption Expenditures (PCE), and the University of Michigan Consumer Sentiment Index are scheduled for release this week. The economic indicators released on this day were weak. The Chicago Fed's National Activity Index for August was -0.16, down from the revised 0.07 in the previous month. A negative figure indicates growth below the long-term average.

Oil prices fell below the $90 per barrel mark due to Russia's change in export ban and the strong dollar effect. On the New York Mercantile Exchange, the November delivery West Texas Intermediate (WTI) crude oil price closed at $89.68 per barrel, down $0.35 (0.39%) from the previous trading day.