New York Stock Market Shows Mixed Early Trading as CPI is Digested... Treasury Yields Rise

The three major indices of the U.S. New York stock market showed mixed trends in the early session on the 12th (local time), as investors monitored the September Consumer Price Index (CPI) released that day and geopolitical risks stemming from the Middle East. Despite the CPI exceeding expectations, the core CPI, which the Federal Reserve (Fed) closely watches, continued its downward trend, leading to a prevailing forecast of a rate hold at the Federal Open Market Committee (FOMC) meeting in November.

At around 10:31 a.m. at the New York Stock Exchange, the Dow Jones Industrial Average was trading at around 33,693, down 111.82 points (0.33%) from the previous close. The S&P 500, which is centered on large-cap stocks, was down 5.38 points (0.12%) at 4,371. Meanwhile, the tech-heavy Nasdaq Composite was up 24.06 points (0.18%) at 13,683.

Currently, within the S&P 500, sectors such as consumer staples, real estate, utilities, and materials are declining, while technology and energy sectors are rising. Ford fell more than 2% due to an expanded strike by the United Auto Workers union. Target is up more than 1% after Bank of America (BoA) upgraded its investment rating. Walgreens Boots Alliance rose nearly 4% following its earnings announcement. Delta Air Lines dropped over 2% despite strong earnings. Bergenstock, which was listed the previous day, also showed a decline of over 3% on this day.

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Investors are closely watching economic indicators released that day, including the CPI and weekly jobless claims, along with movements in Treasury yields and geopolitical risks arising from armed conflict between Israel and the Palestinian militant group Hamas.

The U.S. September CPI inflation rate slightly exceeded market expectations due to strong housing costs and gasoline prices. According to the U.S. Department of Labor, the September CPI rose 3.7% year-over-year and 0.4% month-over-month, surpassing Wall Street analysts' forecasts. However, the core CPI, which excludes volatile energy and food prices, continued to slow. The core CPI, which reflects the underlying inflation trend, increased 4.1% year-over-year and 0.3% month-over-month, in line with market expectations.

Benoit Anne of MFS Investment Management commented, "The figures are not bad enough for the Fed to say it needs to raise rates again in November." Dan Suzuki of Richard Bernstein Advisors said the CPI report was almost exactly as expected and described it as "one of those reports that will be forgotten immediately." Shima Shah of Principal Asset Management called it "an indicator that fails to be an event."

Also released on the same day, the U.S. weekly initial jobless claims for the week of October 1?7 were 209,000, an increase of 2,000 from the previous week, which was in line with Wall Street expectations.

The market continues to expect a rate hold in November. According to the CME FedWatch tool, as of that morning, federal funds futures priced in over a 90% probability that the Fed will keep rates unchanged in November. The probability of a hold at the final FOMC meeting of the year in December stands at around 61%.

The minutes of the September FOMC meeting, released the previous afternoon, revealed a split among members regarding further rate hikes. While the majority of participants judged that it would be appropriate to raise the federal funds rate target once more at a future meeting, some believed no further hikes were necessary. At the last FOMC meeting, the Fed held rates steady at 5.25?5.5% as expected but signaled one more rate hike could follow within the year.

However, since the September FOMC, the rapid rise in long-term Treasury yields has accelerated, and the recent armed conflict between Israel and Hamas has added a Middle East risk factor. As a result, many analysts argue that the Fed no longer needs to pursue additional rate hikes. Fed officials, including Governor Christopher Waller, have made dovish remarks, stating that "financial markets are tightening and will do some of the work for us," lending weight to this view.

Following the release of the September CPI, Treasury yields rose in the New York bond market. The benchmark 10-year U.S. Treasury yield climbed to around 4.65%. The 2-year yield, which is sensitive to monetary policy, surpassed the 5% level again. The dollar index, which measures the U.S. dollar's value against six major currencies, rose more than 0.4% to around 106.

International oil prices are also rising. On the New York Mercantile Exchange, November delivery West Texas Intermediate (WTI) crude oil prices traded around $84 per barrel, up about 1.4% from the previous close.

European stock markets showed mixed performance. Germany's DAX index fell 0.19%, France's CAC index dropped 0.31%, while the UK's FTSE index rose 0.35%.