New York Stock Market Falls Awaiting FOMC Minutes and Nvidia Earnings

'Better-than-expected' January CPI and PPI prompt cautious stance
Focus on Jan 21 FOMC minutes and Nvidia earnings

The three major indices of the U.S. New York stock market are showing a downward trend in the early trading session on the 20th (local time), the first trading day of the week. The market is awaiting the release of the January Federal Open Market Committee (FOMC) minutes and Nvidia's earnings report the following day.

As of 9:33 a.m. at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average is down 0.02% from the previous trading day, standing at 38,620.76. The large-cap focused S&P 500 index is down 0.25% at 4,992.84, and the tech-heavy Nasdaq index is trading 0.37% lower at 15,717.91. The market was closed the previous day, Monday, for Presidents' Day.

By individual stocks, U.S. financial firm Capital One is down 4.3%. The company announced the previous day that it will acquire Discover Financial, which owns the credit card brand "Diners Club," for $35 billion. Discover Financial is up 11.5%. Walmart is up 5.4% following the news of its acquisition of smart TV manufacturer Vizio and better-than-expected earnings. Vizio is also rising 15.4%. U.S. medical device maker Medtronic is down 0.9% despite increased sales. Home improvement retailer Home Depot is down 1.2% after reporting five consecutive quarters of sales decline.

Investors are closely watching market movements following last week's stronger-than-expected January Consumer Price Index (CPI) and Producer Price Index (PPI) releases. The PPI, considered a leading indicator for CPI, rose 0.3% month-over-month and 0.9% year-over-year in January, exceeding market expectations of 0.1% and 0.6%, respectively. The January CPI also increased 0.3% month-over-month and 3.1% year-over-year, surpassing forecasts of 0.2% and 2.9%. Notably, the CPI exceeded the Federal Reserve's inflation target of 2%, heightening concerns about sticky inflation and dampening expectations for interest rate cuts.

The market has shifted the expected timing of Fed rate cuts from March to June in recent weeks. Fed officials have continued to issue warnings that dampen hopes for monetary easing. Some have even started discussing the possibility of additional rate hikes. Former U.S. Treasury Secretary Lawrence Summers said in a Bloomberg TV interview on the 16th that due to persistent inflationary pressures, "there is a meaningful possibility that the Fed's next move will be a rate hike rather than a cut." He estimated the probability of a Fed rate hike at 15%.

Bill Adams, chief economist at Comerica Bank, said, "The Fed will be concerned about the January CPI and PPI reports," adding, "Momentum for inflation has built up over the past few years and is persisting across many sectors of the economy. The January inflation data will reinforce the Fed's inclination to gradually cut rates in 2024."

Accordingly, the market is cautiously watching the FOMC minutes to be released on the 21st. Investors are expected to scrutinize the minutes to gauge the Fed's future monetary policy direction.

Investor attention is also focused on Nvidia, a leading AI company, which will report earnings on the 21st. The key question is whether Nvidia's earnings will meet market expectations. According to LSEG, Nvidia is expected to benefit from increased demand for advanced AI semiconductors, with quarterly revenue for the period ending January projected to exceed $20.37 billion, more than tripling year-over-year. Adjusted net income for the same period is expected to rise 400% to $11.38 billion.

Charles Henry Monchau, Chief Investment Officer (CIO) at Swiss Cize Bank, said, "Nvidia's earnings on Wednesday could be a turning point for the market," adding, "The market is heavily reliant on a few large growth stocks, and if Nvidia disappoints for any reason, there is a downside risk."

U.S. Treasury yields are slightly declining. The benchmark 10-year U.S. Treasury yield is trading at 4.27%, while the 2-year Treasury yield, sensitive to monetary policy, is at 4.59%.

International oil prices are falling amid concerns over global demand uncertainty. West Texas Intermediate (WTI) crude is down $0.92 (1.17%) to $77.54 per barrel, and Brent crude is down $0.80 (0.96%) to $82.76 per barrel.