[New York Stock Market] Rising Close Ahead of CPI... Nasdaq Up 0.75%

The three major indices of the U.S. New York stock market all closed higher on the 10th (local time) ahead of this week's consumer price index (CPI) and corporate earnings announcements.

On the New York Stock Exchange (NYSE) that day, the blue-chip-focused Dow Jones Industrial Average rose 170.57 points (0.45%) from the previous session to close at 37,695.73. The large-cap-focused S&P 500 index increased by 26.95 points (0.57%) to 4,783.45, and the tech-heavy Nasdaq index closed up 111.94 points (0.75%) at 14,969.65.

Among the S&P 500 sectors, seven out of eleven sectors excluding energy, materials, consumer staples, and utilities rose. The gains in technology and communication stocks each exceeded 1%. Intuitive Surgical jumped more than 10% after its preliminary earnings surpassed Wall Street expectations. Homebuilder Lennar rose over 3% following news of a dividend increase. Amazon rose over 1% amid reports of layoffs involving hundreds of employees. While Taiwan's TSMC posted quarterly sales exceeding Wall Street forecasts, most major semiconductor stocks except Nvidia (2.28%) showed broad weakness. Cryptocurrency exchanges Coinbase and Marathon Digital recorded slight declines following a hacking incident after the previous day's close, when the U.S. Securities and Exchange Commission (SEC) mistakenly posted on the official X (formerly Twitter) account that a Bitcoin spot exchange-traded fund (ETF) had been approved.

[Image source=Reuters Yonhap News]

Investors showed cautious trading as they awaited this week's scheduled CPI release and corporate earnings reports led by major banks. Amid growing concerns that market expectations for Federal Reserve (Fed) rate cuts are excessive, investor confidence in a short-term rally appears to have diminished. Philip Kolmar, global strategist at MRB Partners, said, "(Until the rate cut is implemented) this calm situation will persist," adding, "It is quite quiet now, but it will not remain quiet throughout the year."

Wall Street expects the CPI for December last year, to be released the next morning, to rise 0.2% month-over-month and 3.3% year-over-year, marking an increase from the previous month. However, the core CPI, which excludes volatile energy and food prices, is estimated to have risen 0.2% month-over-month and 3.8% year-over-year, showing a slowdown compared to the prior month. The producer price index (PPI), a wholesale price gauge, will be released on the 12th. Investors are likely to use these data to reaffirm the disinflation trend and gauge the future direction of monetary policy.

John Williams, president of the New York Federal Reserve Bank and considered the third most influential Fed official, stated that U.S. interest rates need to remain at a high level for some time to achieve price stability. In his speech, Williams acknowledged "significant progress in slowing inflation" but pointed out that inflation in the services sector remains high, unlike in raw materials and commodities. He said, "We can see from the indicators that we are moving in the right direction," but cautioned, "We are still far from the target (2%). To fully achieve the goal, it is necessary to maintain a restrictive policy stance." Public remarks from Richmond Fed President Thomas Barkin and Minneapolis Fed President Neel Kashkari are also expected this week.

Despite somewhat weakened early expectations for rate cuts this year, the market still favors a rate cut scenario in March. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the futures market is pricing in nearly a 67% chance that the Fed will cut rates by at least 0.25 percentage points in March. Relatedly, Jan Hatzius, Goldman Sachs chief economist, reaffirmed the possibility of a first rate cut in March during a webinar hosted by the think tank Atlantic Council the previous day.

This week also marks the start of the earnings season on Wall Street, with major banks such as JPMorgan, Wells Fargo, and Citigroup reporting their results. UnitedHealth Group and Delta Air Lines will also release earnings on the same day. According to FactSet, the net income of S&P 500-listed companies for the fourth quarter of last year is estimated to have increased 1.3% year-over-year, marking two consecutive quarters of growth.

In the New York bond market, the benchmark 10-year U.S. Treasury yield hovered around 4.03%, while the 2-year yield, sensitive to monetary policy, moved around 4.36%. The dollar index, which measures the value of the U.S. dollar against six major currencies, fell nearly 0.2% to 102.3. Bitcoin prices declined over 2% following the SEC hacking incident the previous afternoon. The SEC announced after the market close that it had approved 11 Bitcoin spot ETFs, including Grayscale and Bitwise.

International oil prices fell. On the New York Mercantile Exchange, the February delivery West Texas Intermediate (WTI) crude oil price dropped 87 cents (1.20%) from the previous session to close at $71.37 per barrel.