[New York Stock Market] Mixed Close Amid Pause... International Oil Prices Plunge 4.9%

The three major indices of the U.S. New York stock market closed mixed and near flat on the 16th (local time), as investors monitored corporate earnings and economic indicators. It appears that the market took a brief pause from the recent rally fueled by inflation data to catch its breath. International oil prices plunged nearly 5% due to rising crude oil inventories and concerns over declining demand.

At the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,945.47, down 45.74 points (0.13%) from the previous session. The large-cap S&P 500 index rose 5.36 points (0.12%) to 4,508.24, while the tech-heavy Nasdaq index gained 9.84 points (0.07%) to close at 14,113.67.

Within the S&P 500, energy, consumer staples, consumer discretionary, and industrial sectors declined, while the other seven sectors rose. The energy sector saw losses exceeding 2% amid the drop in international oil prices. Cisco Systems fell nearly 10% after lowering its future sales guidance. Walmart dropped over 8% despite better-than-expected earnings, as it lowered its future net income outlook. Department store chain Macy's jumped nearly 6% on quarterly results that beat expectations. General Motors (GM) slipped 2% following news of a tentative labor agreement approval. Among big tech stocks, Alphabet (Google) and Microsoft each rose about 1.7%. Tesla fell nearly 4%.

[Image source=Reuters Yonhap News]

Investors took a wait-and-see approach, focusing on corporate earnings mainly from retailers and economic data released that day. After the release of consumer price index (CPI) and producer price index (PPI) figures that showed slower-than-expected inflation, the market that had rallied took a breather. Since November, the S&P 500 has risen more than 7%, the Dow nearly 6%, and the Nasdaq jumped 9.8%.

The weekly initial jobless claims in the U.S. for the period from the 5th to the 11th were 231,000, an increase of 13,000 from the previous week. This exceeded the expert forecast of 222,000 compiled by Dow Jones. The number of unemployed receiving benefits for more than two weeks reached the highest level in about two years. Continued claims, which represent those filing for unemployment benefits for at least two weeks, rose by 32,000 to 1,865,000. This suggests that existing unemployed individuals are facing increasing difficulties in finding new jobs.

These unemployment figures can be seen as additional signals that the cumulative effects of the Federal Reserve's (Fed) interest rate hikes are gradually impacting the labor market. The Fed has been closely monitoring employment-related indicators, believing that the labor market must cool down to slow inflation. However, some argue that this may be a seasonal fluctuation.

On the same day, U.S. import prices for October fell 0.8% month-over-month, a larger drop than experts had forecast according to Dow Jones. This, like the previously released CPI and PPI, is considered a signal reinforcing the trend of slowing inflation. Industrial production in October decreased by 0.6% compared to the previous month, missing both forecasts and the prior month's figures. This decline is interpreted as the impact of the United Auto Workers (UAW) strike, which sharply reduced automobile and parts production.

Chris Larkin of Morgan Stanley said, "It is too early for the Fed to declare victory over inflation, and rate cuts are still far off," but added, "These indicators will ease concerns about further rate hikes. The key question is whether these 'Fed-friendly indicators' will continue to provide bullish momentum to the stock market."

Tom Heinlein, Chief Investment Strategist at U.S. Bank Wealth Management, assessed, "So far, the indicators show that we are in a moderate slowdown where inflation is decreasing without signs of severe contraction."

According to the CME FedWatch tool at the Chicago Mercantile Exchange (CME), as of that morning, the federal funds futures market reflected a 99.7% probability that the Fed will hold rates steady at 5.25?5.5% at the next meeting in December. The probability of holding rates steady through January was 95.6%, while the chance of a rate cut in January was 4%.

Fed Governor Lisa Cook said in a speech that day, "We need to find a sufficiently restrictive policy stance to bring inflation back to 2%," and added, "We must balance the risks of being too tight and too loose." She also stated, "I believe a soft landing is possible due to ongoing disinflation and strong employment, but I am not certain."

In the New York bond market, Treasury yields declined. The benchmark 10-year U.S. Treasury yield fell to around 4.44%. The 2-year yield, which is sensitive to monetary policy, stood at about 4.84%. The dollar index, which measures the value of the U.S. dollar against six major currencies, remained near 104.1, showing little change.

Market analysis following the recent U.S.-China summit is also pouring in. Robin Singh of Morgan Stanley noted in an investor memo that the summit "could help reduce short-term risks of escalating confrontation." Andy LaFerriere of Piper Sandler commented, "Both countries remain in a Cold War state," predicting that "the U.S. will maintain tariffs on China and further tighten investment restrictions."

Meanwhile, the shutdown crisis that had kept financial markets on edge has eased. The U.S. Senate approved an additional temporary budget bill extending through January and February of next year, avoiding a shutdown at least until then. However, opposition from hardline Republicans continues, raising concerns that shutdown risks may resurface after this temporary budget expires.

International oil prices plunged. On the New York Mercantile Exchange, December delivery West Texas Intermediate (WTI) crude futures closed at $72.90 per barrel, down $3.76 (4.9%) from the previous session. This is the lowest level in about four months since early July and marks the largest daily drop since October 4. This decline is attributed to confirmed increases in crude inventories and demand reduction concerns stemming from economic slowdowns in the two major global economies, the U.S. and China.