[New York Stock Market] Dow Hits New High as Inflation Slows... Up Over 8% in One Month

The three major indices of the U.S. New York stock market closed mixed on the last trading day of November, the 30th (local time), digesting inflation indicators that met expectations, remarks from Federal Reserve (Fed) officials, and corporate earnings. The Dow Jones Industrial Average, composed of blue-chip stocks, hit its highest level this year.

At the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at a new high of 35,950.89, up 520.47 points (1.47%) from the previous session. The S&P 500 index, which focuses on large-cap stocks, rose 17.22 points (0.38%) to 4,567.80. Meanwhile, the tech-heavy Nasdaq index closed down 32.27 points (0.23%) at 14,226.22.

As a result, all three major indices ended November with gains. Over the month, the Dow rose 8.8%, the S&P 500 increased 8.9%, and the Nasdaq’s monthly gain exceeded 10%. Chris Zaccarelli, Chief Investment Officer (CIO) at Independent Advisor, told CNBC, "Much of what we saw in November confirms that the economy is still functioning well, consumers are resilient, and the Fed is holding off on rate hikes."

On the day, all sectors of the S&P 500 except communication, technology, and consumer discretionary rose. Healthcare, financials, and industrial stocks gained more than 1%. Salesforce rose over 9% after beating earnings expectations and raising its annual guidance. Snowflake climbed more than 7% on expectations of future revenue growth. Healthcare stocks such as UnitedHealth Group, Johnson & Johnson, and Merck also rallied. Conversely, leading semiconductor stocks Nvidia and AMD fell 2.85% and 1.6%, respectively, amid profit-taking. Tesla slipped 1.66% ahead of the Cybertruck launch.

[Image source=Reuters Yonhap News]

Investors sought to gauge future monetary policy through economic indicators released that day, including the Personal Consumption Expenditures (PCE) price index and unemployment claims, as well as remarks from Fed officials. The core PCE price index for October, the Fed’s preferred inflation gauge, rose 3.5% year-over-year, matching Wall Street expectations. The month-over-month increase was also in line with forecasts at 0.2%.

Jay Woods, Global Chief Strategist at Freedom Capital Markets, described the PCE report as "positive," stating, "The economic data supports the Fed’s restraint on rate hikes and the possibility of rate cuts, providing a tremendous tailwind." October personal consumption expenditures rose 0.2% month-over-month, meeting expert forecasts (0.2%). Considering that September’s personal consumption expenditures rose 0.7%, this suggests a slowdown in consumption.

The Fed’s Beige Book, released the previous afternoon, also noted a slowdown in overall economic activity, including consumer spending, which accounts for two-thirds of the U.S. economy. According to the Atlanta Fed’s GDPNow model, the fourth-quarter GDP forecast was revised down from 2.1% to 1.8%.

Weekly initial jobless claims came in below expectations. According to the U.S. Department of Labor, claims for the week of the 19th to 25th rose by 7,000 to 218,000. Continuing claims for unemployment benefits, which track those claiming benefits for two weeks or more, increased by 86,000 to 1,927,000. The October existing home sales index fell 1.5% month-over-month and 8.5% year-over-year, marking the lowest level since records began.

Market expectations for rate cuts next year remain intact. According to the CME’s FedWatch tool, federal funds futures on that day priced in more than a 75% chance that the Fed will cut rates by at least 0.25 percentage points in May next year.

However, Fed officials continue to express caution about inflation. John Williams, President of the New York Federal Reserve Bank and considered the third most influential Fed official, said in opening remarks at a speech that "it is appropriate to maintain a restrictive stance for a considerable period to bring inflation back to the 2% price stability target." He also added that current rates are high and inflation is expected to decline going forward.

In the New York bond market, the 10-year U.S. Treasury yield, which had been declining recently, rose to around 4.33% that day. The 2-year yield, sensitive to monetary policy, hovered around 4.69%. Despite the drop in Treasury prices (rise in yields) that day, local observers noted that the gains in November were the largest since 2011. The dollar index, which measures the value of the U.S. dollar against six major currencies, rose more than 0.7% to about 103.5.

Investors are now focusing on the upcoming discussion by Fed Chair Jerome Powell scheduled for the next day. He will participate in a conversation and panel discussion in Atlanta. Quincy Crosby, strategist at LPL Financial, said, "The PCE shows easing inflationary pressures," but added, "It remains uncertain whether the Fed will declare victory."

International oil prices fell as the production cut agreement among major oil-producing countries fell short of market expectations. On the New York Mercantile Exchange, the closing price for West Texas Intermediate (WTI) crude oil futures for January delivery dropped $1.90 (2.4%) from the previous close to $75.96 per barrel.