New York Stock Market Slightly Lower Early Session Awaiting PCE and Black Friday Results

The three major indices of the U.S. New York stock market showed slight declines in early trading on the 28th (local time). After a four-week rally, the market is cautiously taking a breather while awaiting catalysts such as the inflation data to be released this week and the Black Friday holiday sales report.

As of 10 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average was down 0.03% from the previous close, trading around 35,321 points. The large-cap-focused S&P 500 index fell 0.16% to 4,543 points, and the tech-heavy Nasdaq index dropped 0.21% to 14,211 points.

Currently, among the 11 sectors within the S&P 500, utilities, energy, consumer staples, and materials stocks are rising, while all other sectors are declining. Cloud security company Zscaler fell more than 5% amid concerns over operating costs despite better-than-expected earnings. Fintech firm Affirm rose over 2%, buoyed by Jefferies' upgrade of its investment rating. Boeing is trading slightly higher after RBC Capital upgraded its rating. Crocs is up nearly 3% following a buy recommendation from Raymond James. Leading semiconductor stocks such as Nvidia, AMD, and Qualcomm are down about 1%.

[Image source=Reuters Yonhap News]

Investors are closely watching the sales results from the shopping season spanning Black Friday through Cyber Monday last week, while also awaiting economic indicators scheduled for release this week, including Personal Consumption Expenditures (PCE), the Beige Book, and remarks from Federal Reserve (Fed) Chair Jerome Powell and other officials.

Susanna Streeter of Hargreaves Lansdown commented, "Market caution is intensifying ahead of the inflation data release." Terry Sandven, Chief Equity Strategist at U.S. Bank Wealth Management, said, "It appears the market has paused in anticipation of holiday spending trends following the November rally," adding, "The tug-of-war between bulls and bears remains balanced."

The U.S. core PCE for October, to be released on the 30th, is expected to show a 3.5% increase year-over-year and a 0.2% rise month-over-month, continuing a deceleration trend. If the slowdown seen in the previously released Consumer Price Index (CPI) is confirmed in the Fed-watched PCE, expectations for interest rate cuts next year will strengthen, likely benefiting 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 also be released on the 29th ahead of the PCE data.

Market expectations for rate cuts continue. According to the CME FedWatch tool, federal funds futures markets are pricing in nearly a 60% chance that the Fed will cut rates by at least 0.25 percentage points in May next year. Bank of America (BoA), in its "2024 Economic Outlook" released the previous day, forecasted that the Fed would begin cutting rates in June next year based on a soft landing scenario. BoA assessed that while cumulative rate hikes will ultimately weaken growth and raise unemployment, a recession is unlikely, and a soft landing for the U.S. economy is the most probable outcome.

In the New York bond market, the benchmark 10-year U.S. Treasury yield is steady around 4.38%. The 2-year yield, which is sensitive to monetary policy, has fallen to about 4.84%. The dollar index, which measures the dollar's value against six major currencies, is down more than 0.2% from the previous close, trading near 102.9.

Fed officials' remarks, which could provide clues about future monetary policy, are ongoing. Fed Governor Christopher Waller is scheduled to speak this morning at a National Association of Business Economists event about the U.S. economic outlook and the Fed's challenges. Remarks are also expected from notable doves, including Austan Goolsbee, President of the Federal Reserve Bank of Chicago, and Governor Michelle Bowman. Chair Powell is expected to emphasize at a panel discussion on the 1st that while he welcomes the recent confirmed slowdown in inflation, there is still a long way to go to achieve the 2% price stability target.

Meanwhile, around noon, the National Retail Federation (NRF) will release the sales report for the Black Friday holiday shopping period, a major shopping season in the U.S. Investors are expected to use this to assess consumer spending trends that have supported the U.S. economy despite ongoing tightening. If strong consumer spending is confirmed, expectations for a year-end Santa rally will likely increase. According to Adobe Analytics, online sales on Black Friday, released the previous day, rose 7.5% year-over-year, exceeding expectations.

U.S. home prices continued to rise. The September CoreLogic Case-Shiller Home Price Index, released on the day, showed a 0.3% increase month-over-month and a 3.9% rise year-over-year, in line with expert forecasts. CNBC reported that despite housing market pressures and expectations for lower housing costs, home prices have continued their upward trend.

European stock markets are declining. Germany's DAX index is down 0.18%, the UK's FTSE index is down 0.29%, and France's CAC index is down 0.59%.