[New York Stock Market] Prolonged Pivot Rally... Nasdaq Rises for 9 Consecutive Days

The three major indices of the U.S. New York stock market continued their rally on the 19th (local time) as expectations for interest rate cuts were maintained despite hawkish remarks from Federal Reserve (Fed) officials, concerns over supply chain disruptions raised over the weekend, and rising oil prices.

At the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 37,557.92, up 251.90 points (0.68%) from the previous session. The S&P 500 rose 27.81 points (0.59%) to 4,768.37, and the Nasdaq Composite ended the day at 15,003.22, up 98.02 points (0.66%). The Nasdaq, which has risen for nine consecutive trading days, surpassed the 15,000 mark for the first time since January 13 of last year.

Fed officials attempted to temper the market’s expectations for rate cuts, calling them premature, but the market has further strengthened its outlook for rate reductions. Raphael Bostic, President of the Federal Reserve Bank of Atlanta, said at the Atlanta Harvard Business School Club that inflation is expected to decline slowly and unevenly, and that the labor market will remain tight for some time with demand outpacing supply.

Bostic stated, "Accordingly, the Fed is in a good position to curb inflation without inflicting significant pain on the labor market," adding, "Considering the resilience of the U.S. economy, there is no reason for the Fed to rush into cutting interest rates." Thomas Barkin, President of the Richmond Fed, also acknowledged significant progress on inflation in an interview with a foreign media outlet but said it is premature to plan the first rate cut.

He said, "We have not yet ended inflation," but noted that if inflation continues at the current pace, the Fed will "naturally respond appropriately." Following the Fed’s expected decision to hold the benchmark interest rate steady and its new dot plot suggesting three rate cuts next year, optimism is emerging in the market that the Fed could implement up to five rate cuts.

[Image source=AFP Yonhap News]

Earlier, other Fed officials also warned against early rate cut expectations, but the market did not react. On the previous day, Federal Reserve Bank presidents Loretta Mester and Austan Goolsbee explained the gap between the Fed and market expectations for rate cuts, putting the brakes on excessive optimism. Loretta Mester, President of the Cleveland Fed, said, "The market is moving ahead of what the Fed thinks," while Austan Goolsbee, President of the Chicago Fed, warned that the Fed will not promise rate cuts anytime soon.

Bank of America evaluated that the market’s expectation that it will be difficult to go against the major trend of rate cuts has spread, maintaining the most optimistic sentiment since early last year.

In the Asian markets, the Bank of Japan (BOJ), which held its final monetary policy meeting of the year, supported the stock rally by maintaining its ultra-loose monetary policy. The Nikkei 225 index surged 1.41% on the BOJ’s policy maintenance. The BOJ kept the negative short-term deposit rate and made no changes to its yield curve control (YCC) policy.

Investors are closely watching key economic indicators to be released this week. This week will see the release of the final U.S. third-quarter gross domestic product (GDP) on the 22nd, and personal consumption expenditures and durable goods orders data?preferred inflation indicators by the Fed?on the 23rd. Bloomberg noted, "Whether the U.S. stock market can extend its bull run depends on the key economic data released this week."

Inflationary pressures in other major countries outside the U.S. are also gradually easing. The Eurozone’s November consumer price index (CPI), released on the same day, rose 2.4% compared to the same period last year, marking the lowest level since July 2021. Canada’s November CPI remained steady at 3.1% compared to the previous month. As global inflation eases, restrictive policies in various countries are expected to be relaxed.

International oil prices continued to rise for the second consecutive day amid the Red Sea crisis. On the New York Mercantile Exchange, the price of West Texas Intermediate (WTI) crude oil for January delivery closed at $73.44 per barrel, up 1.34% from the previous trading day.

Concerns over supply chain disruptions at the Suez Canal have arisen as global shipping companies have halted vessel operations due to attacks by Yemeni armed groups on private ships. The Red Sea Strait is a major maritime route connected to the Suez Canal, linking the Middle East and Europe, and accounts for about 30% of the world’s maritime container traffic.