[New York Stock Market] Mixed Close Amid Shutdown and CPI Concerns... Dow Up 0.16%

The three major indices of the U.S. New York stock market closed mixed and near flat on Monday, the 13th (local time), ahead of this week's temporary budget deadline and the release of the Consumer Price Index (CPI).

At the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,337.87, up 54.77 points (0.16%) from the previous session. The large-cap S&P 500 index fell 3.69 points (0.08%) to 4,411.55, while the tech-heavy Nasdaq index dropped 30.36 points (0.22%) to 13,767.74.

Within the S&P 500, energy, consumer discretionary, and healthcare stocks rose, while utilities, real estate, technology, and communication sectors declined. Boeing surged more than 4% following foreign reports that China may resume purchases of Boeing 737 Max aircraft amid the U.S.-China summit, along with Emirates Airlines' announcement of a $52 billion purchase plan. Tesla also jumped over 4% after it was confirmed that Cybertruck orders include a restriction preventing sales in the first year without approval. Nvidia, which started the day lower, ended near flat after unveiling its high-performance AI chip, the H200, marking its ninth consecutive day of gains. Warner Bros. Discovery fell more than 2% after Guggenheim raised concerns about NFL issues.

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Investors, who had been smiling through rallies until last week, showed caution on Monday as they awaited major events this week such as the possibility of a U.S. federal government shutdown, key economic data releases including the CPI, and the U.S.-China summit. Although Moody's announced after the market close on the 10th that it would downgrade the U.S. sovereign credit rating outlook to 'negative,' the impact did not lead to a significant sell-off.

Moody's announcement came amid growing concerns over a potential U.S. federal government shutdown. The temporary budget bill, barely passed by Congress, faces a deadline on the 17th. If the budget bill fails to pass before then, a shutdown is inevitable. Greg Basak, CEO of AXS Investments, said, "We are observing investors' reactions to Moody's downgrade outlook," adding, "There is some anxiety ahead of several events this week. I think all eyes are on this week's inflation data and Federal Reserve (Fed) policy."

The CPI will be released the following day, the 13th. If the inflation indicator again falls below expectations, it is expected to strengthen hopes for the end of tightening, pushing down Treasury yields and accelerating the stock market rally. Wall Street estimates the October CPI to rise 3.3% year-over-year and 0.1% month-over-month, a slowdown compared to the previous month's increases of 3.7% and 0.4%, respectively. Jamie Dutta, market analyst at Vantage, predicted that the October CPI will meet consensus, saying, "There is little chance of data that will move the market."

This week will also see earnings reports and retail data from retailers such as Home Depot, Target, Walmart, and TJX, which provide insight into U.S. consumer conditions. October retail sales, to be released on the 15th, are expected to decline by 0.1%. While there was a 0.9% year-over-year increase over the past three months through September, a significant drop is anticipated this month. However, this consumer slowdown could reinforce expectations for the Fed's end of tightening, which may be positive for the stock market. On the same day, Bank of America (BoA) reported that debit and credit card spending in October decreased by 0.5% year-over-year.

Additionally, remarks from Fed officials including Lisa Cook, Vice Chair Philip Jefferson, Loretta Mester, President of the Cleveland Fed, and Austan Goolsbee, President of the Chicago Fed, are scheduled. Attention is focused on whether the hawkish tone similar to Fed Chair Jerome Powell's message last week?stating readiness to raise rates if necessary?will continue.

Currently, the market largely expects a rate hold in December. According to the Chicago Mercantile Exchange (CME) FedWatch tool, as of this day, federal funds futures reflect over an 85% probability that the Fed will keep rates steady at 5.25?5.5% at the next meeting. The probability of a "baby step" rate hike stands at around 14%, up from 9% the previous day.

Wall Street shows divergent views on the pace of future Fed rate cuts. Morgan Stanley and UBS anticipate significant rate cuts starting in the first half of next year, whereas Goldman Sachs expects cuts to be about half as large and delayed. The Fed, which held rates steady for two consecutive meetings, plans to release a new dot plot in December.

The most aggressive scenario comes from UBS, which forecasts that as the recession deepens, the current 5.25?5.5% rate will fall to a range of 2.5?2.75% by the end of next year and further down to 1.25% by early 2025. Morgan Stanley expects rate cuts to begin in June next year, followed by another cut in September, and rate reductions at every meeting in the fourth quarter. In this case, the median rate by the end of 2025 would be 2.375%.

Conversely, Goldman Sachs believes the Fed will maintain higher rates longer than expected. It projects the Fed will initiate a 0.25 percentage point rate cut in the fourth quarter of next year, followed by quarterly cuts through mid-2026 totaling 175 basis points. This scenario implies a rate of 3.5?3.75% by mid-2026.

Also this week, a face-to-face summit between U.S. President Joe Biden and Chinese President Xi Jinping is scheduled during the Asia-Pacific Economic Cooperation (APEC) meeting held in San Francisco until the 17th. Besides the resumption of military talks and outcomes of the U.S.-China summit, attention will focus on discussions within APEC regarding the prolonged Ukraine war and geopolitical risks stemming from the Middle East.

In the New York bond market on this day, the 10-year U.S. Treasury yield rose slightly to around 4.63%. The 2-year yield, sensitive to monetary policy, hovered near 5.03%. The dollar index, which measures the dollar's value against six major currencies, declined about 0.2% to 105.6.

International oil prices rose as the Organization of the Petroleum Exporting Countries (OPEC) raised its 2023 crude oil demand forecast. At the New York Mercantile Exchange, December delivery West Texas Intermediate (WTI) crude closed at $78.26 per barrel, up $1.09 (1.41%) from the previous day.