[New York Stock Market] Rise Continues as Treasury Yields Fall... Nasdaq Up 0.71%

The three major indices of the U.S. New York stock market all closed higher on the 11th (local time) as Treasury yields continued to decline despite producer prices exceeding expectations and geopolitical risks stemming from the Middle East. The following day, the Consumer Price Index (CPI), which influences the Federal Reserve's (Fed) monetary policy decisions, is scheduled to be released.

At the New York Stock Exchange (NYSE) that day, the blue-chip-focused Dow Jones Industrial Average closed at 33,804.87, up 65.57 points (0.19%) from the previous session. The large-cap-focused S&P 500 index rose 18.71 points (0.43%) to 4,376.95, and the tech-heavy Nasdaq index gained 96.83 points (0.71%) to close at 13,659.68. This marks a fourth consecutive day of gains.

Among the S&P 500 sectors, all eight sectors except energy, health care, and consumer staples rose. Energy-related stocks fell more than 1% due to a decline in international oil prices. ExxonMobil announced it would acquire Pioneer Natural Resources for about $60 billion, causing its shares to drop more than 3%. This is the largest merger and acquisition (M&A) announced on Wall Street this year. Pioneer’s stock rose more than 1%. The German shoe brand Birkenstock, which debuted on the market that day, closed its first trading day with a double-digit decline. Humana fell more than 1% following news that its CEO will step down in the second half of next year.

[Image source=AFP Yonhap News]

Investors closely monitored the producer price index (PPI) released that day, the minutes of the September Federal Open Market Committee (FOMC) meeting, movements in Treasury yields, and geopolitical risks arising from the armed conflict between Israel and Hamas.

According to the U.S. Department of Labor, the September PPI rose 0.5% month-over-month, exceeding market expectations of 0.3%. The year-over-year increase was also 2.2%, the highest since April (2.3%). However, the core PPI excluding energy and food rose 2.8% year-over-year, slightly slowing from the previous month, and this news contributed to the continued decline in Treasury yields. The September CPI is scheduled to be released the following day.

The September FOMC minutes released that afternoon revealed a split among committee members regarding further rate hikes. While the majority of attendees judged that it would be appropriate to raise the federal funds rate target once more at upcoming meetings, some stated that no further increases were necessary. Previously, the Fed had kept U.S. interest rates steady at 5.25-5.5% as expected at last month’s FOMC and signaled one more rate hike within the year.

With the division over additional hikes confirmed within the Fed, the market is watching the recent surge in long-term Treasury yields. The rise in long-term yields began in earnest in August and accelerated after the September FOMC. The Wall Street Journal (WSJ) analyzed, "If this trend continues, the Fed may no longer need to raise rates further this year," adding, "The Fed’s earlier indication of a possible additional hike this year was made before the recent surge in long-term yields."

Recently, Fed officials have repeatedly made dovish (monetary easing-favoring) remarks. Fed Governor Christopher Waller said at a Republican event in Utah that day, "Financial markets are tightening, which will do some of the work for us," and added, "We are in a wait-and-see mode regarding what happens to interest rates."

Following the release of the FOMC minutes, market expectations for a rate hold in November have strengthened. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market reflected over a 91% probability that the Fed will keep rates unchanged in November, up from about 84% in the morning. The probability of a hold continuing at the final FOMC meeting of the year in December stands at around 72%.

In the New York bond market that day, the benchmark 10-year U.S. Treasury yield fell to around 4.57%, down from the previous session. The 30-year yield hovered near 4.71%. This decline is interpreted as a result of increased demand for safe-haven assets following Hamas’s surprise attack on Israel. The dollar index, which measures the value of the U.S. dollar against six major currencies, remained steady around 105.7.

Lauren Goodwin, portfolio strategist at New York Life Investments, told CNBC, "The market has found some relief in recent Fed officials’ comments," and predicted that if Treasury yields continue to fall, it could provide momentum for a stock market rebound.

International oil prices fell for the second consecutive day despite Middle East risks. At the New York Mercantile Exchange, November delivery West Texas Intermediate (WTI) crude closed at $83.49 per barrel, down $2.48 (2.88%) from the previous session.