[New York Stock Market] Major Indices Decline Amid January PPI Rebound

The three major New York stock markets showed a decline following a rebound in the January Producer Price Index (PPI). After the Consumer Price Index (CPI), the PPI also came in higher than initially expected, fueling widespread speculation that the U.S. Federal Reserve (Fed) will delay cutting its benchmark interest rate.

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On the 16th (local time), at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 38,627.99, down 0.37% from the previous session. The large-cap-focused Standard & Poor's (S&P) 500 index fell 0.48% to 5,005.57, and the Nasdaq index dropped 0.82% to 15,775.65. These three major indices had shown gains for five consecutive weeks but declined this week for the first time in six weeks.

The cause of the decline is attributed to the PPI exceeding expectations. According to the U.S. Department of Labor, the January PPI rose 0.3% month-over-month on a seasonally adjusted basis. This surpassed the expert forecast of a 0.1% increase compiled by The Wall Street Journal (WSJ), marking the highest level in five months. The core PPI increased 0.6% month-over-month, the largest rise in a year since January of last year. As producer prices rebounded, government bond yields rose, and the value of the U.S. dollar also increased. The yield on the 10-year U.S. Treasury note rose about 6 basis points (1bp = 0.01%) from the previous day, surpassing 4.3%.

Hawkish remarks from the Fed have also negatively impacted the market. Mary Daly, President of the Federal Reserve Bank of San Francisco, said at an event that regarding interest rate cuts, "It is necessary to resist the temptation to act quickly when patience is required, and we must be prepared to respond nimbly depending on how the economy unfolds." She added that the forecast of three rate cuts this year is a "reasonable baseline assumption."

The market expects the Fed's first rate cut to occur in June. The University of Michigan's report on the same day showed the one-year inflation expectations at 3.0%, slightly up from 2.9% the previous month. The February consumer sentiment index was preliminarily recorded at 79.6, an improvement from 79.0 in the previous month. With short-term inflation expectations rising and consumer sentiment improving, expectations for Fed rate cuts are likely to retreat further.

According to the Chicago Mercantile Exchange (CME) FedWatch tool, the probability that the Fed will cut rates in May, based on federal funds (FF) futures market at closing, remained at 35.7%. The likelihood of a rate cut in June reached 74.1%. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) rose 1.64% from the previous session to 14.24.