New York Stock Market Mixed on 'Hawkish Powell'... Nasdaq Down 0.14%

March Interest Rate Cut Expectations Retreat
Market Waits and Watches Amid Fed Officials' Remarks

The three major indices of the U.S. New York stock market showed mixed trends in early trading on the 6th (local time). The market, which had fallen the previous day as the Federal Reserve's (Fed) rate cut outlook was pushed back, is showing a cautious stance as investors await further comments from Fed officials. The 10-year U.S. Treasury yield, which had risen the previous day, is stabilizing and is trading slightly lower at around 4.15% compared to the previous day.

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As of 10:01 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average was up 0.17% from the previous trading day, standing at 38,443.53. The large-cap focused S&P 500 index was down 0.03% at 4,941.36, and the tech-heavy Nasdaq index was down 0.14% at 15,575.79.

By individual stocks, U.S. pharmaceutical company Eli Lilly is up more than 3% on strong sales of its weight loss drug. U.S. software company Palantir Technologies surged over 26% following strong fourth-quarter earnings last year. Vehicle semiconductor company NXP Semiconductors, which posted strong results, is up about 1%.

The New York stock market fell the previous day due to Fed Chair Jerome Powell's "hawkish remarks." The Dow Jones Industrial Average dropped 0.71% from the previous trading day, while the S&P 500 and Nasdaq indices fell 0.32% and 0.2%, respectively. Powell appeared on CBS on the 4th and said, "I want to see more evidence that inflation is steadily falling to 2%," once again dismissing the prospect of a rate cut in March, which worsened investor sentiment.

Fed officials also expressed views similar to Chair Powell's one after another. Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, said the previous day, "The neutral rate may have risen at least during the recovery period after the pandemic," and added, "The FOMC should give itself time to assess incoming economic data before starting to cut the federal funds rate." Austan Goolsbee, President of the Federal Reserve Bank of Chicago, also said on the same day, "We have received quite good inflation reports near or even below the Fed's target over the past seven months," and "If we continue to get data like what we have received, I believe we should enter the path to normalization." This repeated Chair Powell's view that further confirmation of inflation slowdown is necessary.

In addition, indicators showing the strength of the U.S. economy, which delays Fed rate cuts, were released. The Institute for Supply Management (ISM) reported that the January Services Purchasing Managers' Index (PMI) was 54.3, maintaining expansion above 50 for 13 consecutive months. This significantly exceeded both December's 50.5 and the market expectation of 50.2. The January nonfarm payrolls released on the 2nd increased by 353,000 compared to the previous month, more than double the expert forecast of 185,000.

Sonal Desai, Chief Investment Officer (CIO) of Franklin Templeton Fixed Income, said, "We are slowly aligning with the Fed," adding, "In December last year, the market thought the Fed would bring forward rate cuts, but the data is not cooperating with the market. The data is not weak enough to pressure the Fed to cut rates hastily."

The market is closely watching the scheduled remarks from Fed officials on the day. Loretta Mester, President of the Federal Reserve Bank of Cleveland, and Susan Collins, President of the Federal Reserve Bank of Boston, are expected to speak about monetary policy. Remarks from Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, and Patrick Harker, President of the Federal Reserve Bank of Philadelphia, are also anticipated. The 4th quarter Household Debt and Credit Report released by the New York Fed is also attracting market attention. Companies releasing earnings on the day include Amgen, Chipotle, and Ford.

Chris Loew of FHN Financial said, "They (Fed officials) are likely to repeat Chair Powell's recent message," adding, "The Fed is expected to cut rates this year, but not immediately."

The U.S. 10-year Treasury yield is trading at around 4.13%, down 3.3 basis points (1 bp = 0.01 percentage point) from the previous day. The 2-year Treasury yield is also trading down 2.7 basis points at around 4.44%.

International oil prices are rising amid the risk of escalation in the Middle East as U.S. Secretary of State Antony Blinken visits the region. West Texas Intermediate (WTI) crude oil is up $0.46, trading at $73.24 per barrel. Brent crude is up $0.42, trading at $78.41.