"Waiting for FOMC, New York Stock Market Mixed in Early Trading Within a Narrow Range"

The three major indices of the U.S. New York stock market showed mixed movements near the flat line in early trading on the 13th (local time) as investors awaited the December Federal Open Market Committee (FOMC) results, which are likely to keep the benchmark interest rate unchanged. Despite additional data confirming a slowdown in inflation, the market remained cautious without significant changes from the previous session.

At around 9:58 a.m. at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average was trading at 36,571, down 0.02% from the previous session. The large-cap-focused S&P 500 index was up 0.06% at 4,646, while the tech-heavy Nasdaq index rose 0.18% to 14,559.

Currently, within the S&P 500, materials, real estate, and industrial sectors are declining, while technology, utilities, and financial sectors are rising. Tesla fell more than 1.7% after news of a recall of over 2 million vehicles. Pfizer dropped nearly 9% after releasing a disappointing 2024 annual guidance. Coinbase declined over 1% as Cathie Wood’s Ark Innovation ETF sold shares for the third consecutive day. Roblox rose more than 2% after Wells Fargo recommended increasing its weighting.

[Image source=Reuters Yonhap News]

Investors are monitoring the December FOMC results, scheduled for release at 2 p.m. Eastern Time, while also watching the producer price index (PPI) and Treasury yield movements announced before the market opened. According to the U.S. Department of Labor, the November PPI, a wholesale price gauge, rose 0.9% year-over-year, continuing the slowdown trend. This is the lowest level since July (0.3%) and below both the previous month’s increase (1.2%) and the 1.0% forecast by experts compiled by Refinitiv. The November PPI also remained flat month-over-month, falling short of the 0.1% forecast. Following the release of the November consumer price index (CPI) the previous day, which showed a 3.1% year-over-year increase consistent with market expectations, these signals confirm easing inflationary pressures.

The Federal Reserve (Fed) will announce the final FOMC results of the year this afternoon. With a rate hold widely expected, the key focus is on the dot plot reflecting future rate projections and Fed Chair Jerome Powell’s press conference. The market anticipates that, considering the recent inflation slowdown, the Fed will keep rates steady while signaling a more hawkish stance than expected in the dot plot, potentially hinting at rate cuts next year but tempering market optimism. Investors will likely gauge the timing and pace of next year’s rate cuts based on the dot plot and Powell’s remarks.

According to the CME’s FedWatch tool, federal funds futures currently price in over a 98% probability that the Fed will hold rates steady at this month’s meeting. The probability of a hold in January next year exceeds 92%. The chances of a rate cut of at least 0.25 percentage points in March or May next year are above 48% and 78%, respectively.

A survey released by CNBC yesterday showed that 69% of respondents expect the Fed to begin cutting rates in June next year, which is not as soon as some market expectations. A Bloomberg survey conducted earlier this month among economists also indicated that the earliest expected rate cut would be in June next year. The recently released core CPI excluding housing costs, known as the ‘super core’ inflation, continues to show little sign of easing, fueling inflation concerns. The November super core CPI rose 3.93% year-over-year and 0.44% month-over-month.

This week, in addition to the Fed, monetary policy meetings will be held by the European Central Bank (ECB) and the Bank of England (BOE). The ECB, which is also expected to hold rates steady, will release updated economic forecasts. Other countries including Brazil, Norway, Mexico, Taiwan, the Philippines, and Russia will also decide on their interest rates.

In the New York bond market today, the 10-year U.S. Treasury yield fell to around 4.17%. The 2-year yield, which is sensitive to monetary policy, dropped to about 4.69%. The dollar index, which measures the value of the U.S. dollar against six major currencies, remained steady at 103.8. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street’s ‘fear gauge,’ rose more than 1% to trade around 12.2.

European stock markets showed slight gains. Germany’s DAX index rose 0.1%, the UK’s FTSE index increased 0.32%, and France’s CAC index was up 0.17%.