[New York Stock Market] Slight Decline Amid Consolidation... Dow Down 0.16%

The three major indices of the U.S. New York stock market closed slightly lower on Cyber Monday, the 27th (local time), amid a pause in trading. This week, the release of the Personal Consumption Expenditures (PCE) price index, the inflation indicator preferred by the U.S. Federal Reserve (Fed), and remarks by Chairman Jerome Powell are scheduled.

At the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 35,333.47, down 56.68 points (0.16%) from the previous session. The large-cap S&P 500 index fell 8.91 points (0.2%) to 4,550.43, and the tech-heavy Nasdaq index dropped 9.83 points (0.07%) to 14,241.02.

Among the 11 sectors within the S&P 500, real estate, consumer discretionary, technology, and utilities stocks rose, while healthcare, industrials, communication services, energy, and financials declined. Affirm rose 11.97% and Shopify gained 4.9% on news of increased Black Friday online sales. Amazon's gains were limited despite strong shopping season expectations, as the European Union (EU) Commission expressed concerns over reduced competition related to its acquisition of iRobot. iRobot plunged more than 17%. Foot Locker fell nearly 1% after Citigroup downgraded its investment rating to sell. Crown Castle rose nearly 4% following a letter from Elliott Management demanding new management, board leadership, and a review of business strategy, which was reported by foreign media.

[Image source=Reuters Yonhap News]

Investors monitored the shopping season results from Black Friday through Cyber Monday last week while awaiting economic indicators such as the PCE, the Beige Book, and remarks from officials including Chairman Powell this week, seeking hints on future monetary policy direction and economic outlook. As it was the first day after the holiday, investors showed a cautious stance amid a lack of major catalysts.

The U.S. core PCE for October, to be released on the 30th, is expected to show a 3.5% year-over-year increase and a 0.2% month-over-month rise, continuing a slowdown trend. If the slowdown is reconfirmed in the PCE, which the Fed closely watches following the previously released Consumer Price Index (CPI), expectations for rate cuts next year will strengthen, positively impacting the New York stock market. Amid growing hopes for a soft landing of the U.S. economy, the Beige Book containing the Fed's economic assessment will be released on the 29th ahead of the PCE announcement.

Bank of America (BoA) forecasted in its '2024 Economic Outlook' released that the Fed will begin its first rate cut in June next year based on a soft landing scenario. Michael Gapen, BoA's chief U.S. economist, explained in an afternoon video briefing, "I believe the rate hikes that started in March last year are over," adding, "Rate cuts will begin in June 2024 at a pace of 0.25 percentage points per quarter."

BoA assessed that the cumulative rate hikes will ultimately weaken growth and raise unemployment but predicted a 'soft landing' rather than a recession for the U.S. economy. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, remains resilient supported by a strong labor market and balance sheets, while recent inflation indicators show a clear deceleration trend.

According to the Chicago Mercantile Exchange (CME) FedWatch, federal funds futures markets reflect nearly a 60% probability that the Fed will cut rates by at least 0.25 percentage points in May next year. This is a significant increase from about 29% at the end of October. Currently, futures markets expect a total of four rate cuts by the end of the year.

The Wall Street Journal (WSJ) cited these figures, reporting, "Investors expect rate cuts soon regardless of a recession," and "Treasury yields are quickly pricing in these Fed rate cut expectations." The outlet also noted that these rate cut hopes are driven by lower-than-expected inflation data and weak Purchasing Managers' Index (PMI) figures.

Fed Chairman Powell will participate in a panel discussion at an event in Atlanta on the 1st. There, he is expected to welcome the recent confirmed inflation slowdown trend but emphasize that there is still a long way to go to achieve the 2% price stability target. Public remarks by John Williams, president of the New York Federal Reserve Bank and considered the Fed's third-ranking official, Christopher Waller, and Michelle Bowman, Fed governors, are also scheduled this week.

In the New York bond market, the benchmark 10-year U.S. Treasury yield is hovering around 4.38%. The 2-year yield, sensitive to monetary policy, stands at about 4.89%. The dollar index, which measures the dollar's value against six major currencies, fell 0.18% to 103.2 compared to the previous session.

Meanwhile, investors are looking to confirm consumer spending trends driving the U.S. economy through the results of Black Friday and Cyber Monday shopping seasons. If strong consumption is confirmed in these events, expectations for a year-end Santa rally will increase. According to Adobe Analytics, Black Friday online sales rose 7.5% year-over-year, exceeding forecasts. Consequently, Cyber Monday outlooks have also been revised upward.

Besides the PCE, this week will also see the release of consumer sentiment indicators such as the Conference Board (CB) Consumer Confidence Index, preliminary third-quarter Gross Domestic Product (GDP) growth rate, and the ISM Manufacturing Purchasing Managers' Index (PMI).

Oil prices fell for the fourth consecutive trading day ahead of the regular meeting of the Organization of the Petroleum Exporting Countries Plus (OPEC+). On the New York Mercantile Exchange, West Texas Intermediate (WTI) crude oil for January delivery declined 68 cents (0.90%) to close at $74.86 per barrel.