[New York Stock Market] Slight Rise on US Interest Rate Cut Expectations... Nasdaq Up 0.29%

The three major indices of the U.S. New York stock market closed higher on the 28th (local time) within a narrow range. As investors adopted a more cautious stance ahead of this week's inflation data releases, dovish remarks from Federal Reserve (Fed) officials mentioning the possibility of interest rate cuts acted as a positive catalyst for the market.

At the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 35,416.98, up 83.51 points (0.24%) from the previous session. The large-cap S&P 500 index rose 4.46 points (0.1%) to 4,554.89, while the tech-heavy Nasdaq index gained 40.73 points (0.29%) to close at 14,281.76.

Among the 11 sectors within the S&P 500, all except healthcare, industrials, and financials posted gains. Despite concerns over slowing consumer spending, retail-related stocks performed well as online sales during Black Friday and Cyber Monday exceeded expectations. Foot Locker rose more than 3% from the previous close. The SPDR S&P Retail ETF showed nearly a 1% increase. Fintech company Affirm jumped over 11% following an upgrade in investment rating by Jefferies. Boeing also rose more than 1% after RBC Capital upgraded its rating.

[Image source=Reuters Yonhap News]

Investors showed cautious trading behavior, closely watching Fed officials' remarks ahead of this week's scheduled economic data releases such as Personal Consumption Expenditures (PCE), the Beige Book, and remarks from Fed Chair Jerome Powell. Susanna Streeter of Hargreaves Lansdown commented, "Market caution is intensifying ahead of the inflation data release."

The dovish comments from Fed Governor Christopher Waller released that day raised market expectations for interest rate cuts. Waller, considered a prominent hawk, attended an event hosted by the American Enterprise Institute (AEI) think tank in Washington, D.C., where he stated that if inflation continues to ease over the next few months, the Fed could begin cutting rates.

He said, "This has nothing to do with efforts to stimulate the economy," adding, "There is no reason for us to say we need to keep rates high." He also noted, "Confidence is growing that the current monetary policy is in the right position to slow the economy and bring inflation down to the 2% target," and added that upcoming economic data releases over the next few months will provide answers. On the same day, Fed Governor Michelle Bowman reiterated the need for further rate hikes to achieve price stability, but her comments had little impact on the market.

Expectations for a pivot (a change in policy direction) strengthened immediately in financial markets. According to the CME FedWatch tool, federal funds futures on that day priced in more than a 65% chance that the Fed will cut rates by at least 0.25 percentage points by May next year, a significant increase from the 50% range seen the previous day.

In the New York bond market, Treasury yields slipped. The benchmark 10-year U.S. Treasury yield fell to around 4.35% following Waller's remarks. The 2-year yield, which is sensitive to monetary policy, also dropped to about 4.75%. The dollar index, which measures the value of the U.S. dollar against six major currencies, declined more than 0.4% to around 102.8.

Consequently, investors are focusing on the Beige Book to be released the next day and the Personal Consumption Expenditures (PCE) Price Index scheduled for the 30th. The core PCE for October in the U.S. is expected to rise 3.5% year-over-year and 0.2% month-over-month, continuing the slowdown trend. If the easing trend is confirmed again in the PCE following the Consumer Price Index (CPI), expectations for rate cuts next year are likely to strengthen further. Ahead of the final Federal Open Market Committee (FOMC) meeting in December this year, Fed Chair Jerome Powell's discussion remarks will also be released on the 1st.

The economic data released that day confirmed resilience despite cumulative tightening. The Conference Board's Consumer Confidence Index for November came in at 102.0, surpassing both the previous month's 99.1 and the forecast of 101. U.S. home prices reached record highs. According to S&P CoreLogic Case-Shiller, the home price index for September this year rose 3.9% year-over-year.

International oil prices rose for the first time in five trading days ahead of the OPEC+ oil-producing countries meeting. On the New York Mercantile Exchange, January delivery West Texas Intermediate (WTI) crude oil closed at $76.41 per barrel, up $1.55 (2.07%) from the previous session.