[New York Stock Market] Disappointment over FOMC Minutes with No 'Interest Rate Cut'... All Three Major Indexes Fall Together

The three major indices of the U.S. New York stock market closed slightly lower on the 21st (local time), digesting the Federal Reserve's (Fed) Federal Open Market Committee (FOMC) minutes, which did not include any discussion of interest rate cuts. Weak earnings forecasts from retailers also drove the decline.

At the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 35,088.29, down 62.75 points (0.18%) from the previous session. The large-cap S&P 500 index fell 9.19 points (0.20%) to 4,538.19, while the tech-heavy Nasdaq index closed down 84.55 points (0.59%) at 14,199.98.

In the S&P 500, all sectors except healthcare, utilities, materials, and consumer staples declined. Microsoft (MS), which hit an all-time high the previous day on news of former OpenAI CEO Sam Altman's joining, fell more than 1% amid renewed speculation about his return. Nvidia dropped nearly 1% ahead of its earnings announcement after market close. Apparel retailer American Eagle plunged nearly 16% due to a disappointing annual operating profit guidance. Lowe's fell more than 3% after lowering its annual sales outlook.

[Image source=Reuters Yonhap News]

Investors closely watched the FOMC minutes, corporate earnings, and forecasts ahead of the Thanksgiving holiday. The Fed's November FOMC regular meeting minutes, released in the afternoon, confirmed concerns about the possibility of inflation surging again due to a strong economy. There was no discussion of rate cuts. The minutes stated, "Most meeting participants remain aware of the risk of inflation resuming" and "there is a need to maintain a restrictive monetary policy for the time being." Previously, the Fed held the benchmark interest rate steady at 5.25-5.5% during the October 31-November 1 FOMC meeting.

Market expectations that the Fed's rate hikes were over and that cuts would begin next year slightly weakened. According to the Chicago Mercantile Exchange (CME) FedWatch tool, after the release of the FOMC minutes, the federal funds futures market lowered the probability of the Fed holding rates steady at 5.25-5.5% in the December meeting to the mid-90% range. Meanwhile, the probability of a baby step (0.25 percentage point rate hike) rose from 0% to the 5% range.

With retail earnings disappointments and downward revisions in sales forecasts confirmed, Nvidia, a leading AI stock, announced its earnings after market close. Nvidia's Q3 revenue was $18.12 billion, far exceeding Wall Street's estimate of $16.18 billion, representing a 206% increase year-over-year. Earnings per share reached $4.02. However, Nvidia also acknowledged that additional U.S. regulations on AI semiconductor chips for China could have negative future impacts.

Investors are also paying attention to the flood of OpenAI-related news since last Friday. After OpenAI employees collectively threatened to resign demanding the reinstatement of Sam Altman, who was suddenly dismissed, the OpenAI board has begun negotiations to bring Altman back. Earlier, Microsoft (MS) senior executives, who announced Altman's joining, revealed an offer to OpenAI employees to "provide the same compensation" as a way to persuade them.

Additionally, this week includes the Thanksgiving holiday closure on the 23rd and early market close on the 24th. Typically, trading hours are shortened during the Thanksgiving week, leading to increased volatility. On the 24th, the U.S. November Manufacturing PMI will be released, and on the 26th, the Organization of the Petroleum Exporting Countries Plus (OPEC+) oil-producing countries meeting will take place.

In the New York bond market, the benchmark 10-year U.S. Treasury yield fell to around 4.4%. The 2-year yield hovered around 4.88%. The dollar index, which measures the value of the U.S. dollar against six major currencies, rose more than 0.1% from the previous session to 103.5.

International oil prices fell for the first time in three trading days ahead of the oil-producing countries' meeting. On the New York Mercantile Exchange, West Texas Intermediate (WTI) crude oil for January 2024 delivery closed at $77.77 per barrel, down 6 cents (0.08%) from the previous day.