[New York Stock Market] Rebound on Inflow of Low-Price Buying... Nvidia Rises to 3rd in Market Cap

S&P Recovers Above 5000
Goolsbee: "PCE Inflation Key... Entering 2% Inflation Path"

The three major indices of the U.S. New York stock market rebounded and closed higher on the 14th (local time) after a sharp decline the previous day caused by the 'January Consumer Price Index (CPI) shock.' Investors, focusing on corporate earnings and fundamentals, engaged in reactive buying. Nvidia, the absolute leader in AI semiconductors, rose more than 2.5%, surpassing Alphabet, Google's parent company, to become the third-largest company by market capitalization.

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On this day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 38,424.27, up 151.52 points (0.4%) from the previous session. The large-cap-focused S&P 500 index rose 47.45 points (0.96%) to close at 5,000.62, regaining the 5,000 level. The tech-heavy Nasdaq index jumped 203.55 points (1.3%) to close at 15,859.15.

By individual stocks, Nvidia, which dominates the AI semiconductor market, rose 2.46%, overtaking Alphabet to become the third-largest company by market cap after Microsoft (MS) and Apple. Lyft surged 35.2% following strong fourth-quarter earnings last year. Although it gave back a significant portion of its after-hours gains due to an error in this year's earnings forecast disclosed the previous day, it still showed strength. Uber, which announced a $7 billion share buyback, jumped more than 14.7%. Airbnb fell 1.7% despite earnings exceeding market expectations.

The previous day, the New York stock market fell across the board as the U.S. January CPI inflation rate came in at 3.1% year-over-year, exceeding the market forecast of 2.9%. The Dow Jones Industrial Average dropped 1.35%, while the S&P 500 and Nasdaq indices fell 1.37% and 1.8%, respectively. Disappointment that the Federal Reserve's (Fed) pivot point (direction change) would be delayed until after June led to stock sell-offs.

However, the market rebounded within a day as bargain buying flowed in amid strong corporate earnings announced after the market closed.

Terry Sandborn, chief equity strategist at U.S. Bank Asset Management, said, "Although the January CPI increases the likelihood that rate cuts will be delayed until the second half of 2024, the market rally is not over. The previous day's decline allowed stock valuations to align better with fundamentals. This correction will provide an opportunity for investors seeking reasonable valuations to enter the market."

Meanwhile, a Fed official stated that there is no need to be overly reactive to the January CPI increase. Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said in a speech at the Council on Foreign Relations (CFR) in New York that "even if inflation is higher than market expectations over the next few months, it will still be consistent with the path back to our target." He also emphasized that the Personal Consumption Expenditures (PCE) price index, not the CPI released the previous day, is the important measure.

President Goolsbee also expressed caution that the timing of rate cuts should not be too delayed. He said, "I do not support waiting until the 12-month annual inflation reaches 2% before starting rate cuts. The current monetary policy of the central bank is quite restrictive. If we remain at this restrictive level for too long, we should worry about a sharp rise in unemployment," he added.

The market expects volatility to continue for the time being.

Jeremy Straub of Coastal Wealth said, "As uncertainty continues about how the Fed will respond to the ongoing inflation situation, investors should expect continued volatility." He added, "The economy is still strong, and there is no need for lower interest rates to support stock prices. If the Fed cuts rates, it could signal that the economy is slowing, so investors should not worry too much about the currently elevated rates."

Bond yields, which surged the previous day, are now falling. The U.S. 10-year Treasury yield, a global bond yield benchmark, has dropped more than 5 basis points (bp) to 4.26%, while the 2-year Treasury yield, sensitive to monetary policy, has fallen more than 7 bp to around 4.58%.

International oil prices are declining due to an increase in U.S. crude oil inventories. West Texas Intermediate (WTI) crude fell $1.23 (1.6%) to $76.64 per barrel, and Brent crude dropped $1.17 (1.4%) to $81.60 per barrel.