[New York Stock Market] Mixed Close Near Steady Ahead of PCE... Nasdaq Down 0.16%

The three major indices of the U.S. New York stock market closed mixed and mostly flat on the 29th (local time), amid ongoing expectations of a pivot (direction change) next year and ahead of the release of the Personal Consumption Expenditures (PCE) price index, an inflation indicator closely watched by the Federal Reserve (Fed).

At the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 35,430.42, up 13.44 points (0.04%) from the previous session. The large-cap focused S&P 500 index fell 4.31 points (0.09%) to 4,550.58, while the tech-heavy Nasdaq index dropped 23.27 points (0.16%) to 14,258.49.

Among the 11 sectors within the S&P 500, communication services, utilities, energy, and consumer discretionary stocks declined, while financials, real estate, materials, and industrials rose. General Motors (GM) surged nearly 10% after announcing a $10 billion share buyback and dividend increase plan. Phillips 66 rose more than 3% following news that Elliott acquired $1 billion worth of company shares. Charles Schwab gained nearly 7% after Piper Sandler named the company as a potential beneficiary of interest rate cuts. Foot Locker climbed over 16% on better-than-expected third-quarter earnings. Health insurers Cigna and Humana fell by over 8% and 3%, respectively, amid merger discussion reports. Competitors CVS and UnitedHealth also showed weakness.

[Image source=Reuters Yonhap News]

Investors monitored movements in Treasury yields and the Beige Book release, while awaiting economic indicators such as the PCE and remarks from Fed Chair Jerome Powell scheduled for this week. They appear to be gauging the Fed’s future monetary policy direction through these data points.

On the previous day, Fed Governor Christopher Waller stated that if inflation continues to ease, rate cuts could begin within a few months, boosting market expectations for a pivot. Bill Ackman, who leads Pershing Square, also mentioned in a Bloomberg interview that Fed rate cuts could happen sooner than expected, projecting the first quarter of next year as a possible timing.

The Beige Book released that afternoon reported that "overall economic activity has slowed" since the last report. Particularly, due to high inflation, consumers have become more price-sensitive, leading to declines in discretionary items, durable goods including appliances and furniture, across most regions. This supports recent forecasts that consumer spending, which accounts for two-thirds of the U.S. economy, will pick up significantly starting in the fourth quarter. The labor market was reported to be stagnant or growing modestly in most areas. Economic outlooks for the next 6 to 12 months also worsened compared to previous assessments.

Earlier that morning, the preliminary estimate for U.S. third-quarter GDP growth exceeded an annualized 5%. According to the U.S. Department of Commerce, the preliminary GDP growth rate for Q3 was revised up by 0.3 percentage points from the previously announced flash estimate of 4.9% to 5.2%. However, concerns remain about fourth-quarter economic growth. Inflation remains well above the 2% price stability target, and factors such as high interest rates, credit tightening, depletion of excess savings post-pandemic, and the resumption of student loan repayments are expected to negatively impact the overall economy.

The following day, the PCE price index, an inflation gauge closely watched by the Fed, will be released. The core PCE for October is expected to rise 3.5% year-over-year and 0.2% month-over-month, continuing the deceleration trend. If the slowdown is confirmed in the PCE following the Consumer Price Index (CPI), expectations for rate cuts next year are likely to strengthen further. According to the CME FedWatch tool, federal funds futures markets on that day priced in about an 80% chance that the Fed will cut rates by at least 0.25 percentage points in May next year, a significant increase from around 55% a week earlier.

Amid ongoing rate cut expectations, the 10-year U.S. Treasury yield fell below the 4.3% level in the New York bond market that day. The 2-year yield, sensitive to monetary policy, also dropped to around 4.64%. The Dollar Index, which measures the dollar’s value against six major currencies, remained steady at 102.83.

Raphael Bostic, President of the Federal Reserve Bank of Atlanta, supported market pivot expectations in a post on the bank’s website, stating, "Based on our research and feedback from business leaders, the inflation slowdown is expected to continue." On the other hand, Thomas Barkin, President of the Richmond Fed, appeared on CNBC the same day expressing concerns about the possibility of inflation surging again and argued that the Fed should not abandon the option of further rate hikes.

Oil prices rose on reports that the Organization of the Petroleum Exporting Countries (OPEC) and the non-OPEC major oil producers group, OPEC Plus (OPEC+), are considering additional production cuts. On the New York Mercantile Exchange, January delivery West Texas Intermediate (WTI) crude closed at $77.86 per barrel, up $1.45 (1.90%) from the previous session.