[New York Stock Market] Slight Decline Ahead of PCE Inflation Data... Nasdaq Down 0.55%

The three major indices of the U.S. New York stock market closed slightly lower on the 28th (local time) as they digested the growth rate and the sharp rise in Bitcoin ahead of the Personal Consumption Expenditures (PCE) price index announcement scheduled for the next day.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 38,949.02, down 23.39 points (0.06%) from the previous session. The S&P 500, which focuses on large-cap stocks, fell 8.42 points (0.17%) to 5,069.76, and the tech-heavy Nasdaq dropped 87.56 points (0.55%) to close at 15,947.74.

Within the S&P 500, telecommunications, technology, healthcare, and energy sectors declined, while real estate, utilities, financials, materials, and industrial sectors rose. Due to the rise in Bitcoin prices, MicroStrategy surged more than 10% compared to the previous session. Coinbase also closed slightly higher. Beyond Meat rose more than 30% on strong earnings. eBay increased nearly 8% following a dividend hike announcement. On the other hand, semiconductor stocks such as Nvidia, which had recently led the tech rally, showed a downward trend. Nvidia, Intel, Qualcomm, and AMD each fell around 1%. Urban Outfitters dropped more than 12% due to weak earnings.

[Image source=Reuters Yonhap News]

Investors focused on the upcoming PCE price index release the next day, closely watching the fourth-quarter GDP and the sharp rise in Bitcoin. According to the U.S. Department of Commerce, the preliminary GDP for the fourth quarter of last year increased at an annualized rate of 3.2%. This figure was revised down by 0.1 percentage points from the previously released flash estimate of 3.3%. It also showed a clear slowdown compared to the confirmed 4.9% growth rate in the third quarter of last year. However, despite high interest rates and concerns about tightening, relatively strong consumer spending and government expenditures were reflected, maintaining a high growth rate in the 3% range. Such robust growth is cited as a factor sustaining concerns about a rebound in inflation.

Currently, market attention is focused on the January PCE price index, the inflation indicator preferred by the Federal Reserve (Fed). Following the release of the January Consumer Price Index (CPI), which exceeded expectations, investors are expected to use the PCE data to reconfirm inflationary pressures and gauge the future direction of monetary policy.

Wall Street expects the January PCE price index to rise 0.3% month-over-month, a steeper increase than the 0.2% rise in the previous month. However, on a year-over-year basis, it is expected to increase by 2.4%, down from the previous month’s 2.6% rise. The core PCE price index, excluding energy and food, is estimated to rise 0.4% month-over-month and 2.8% year-over-year. Jay Hartfield, CEO of Infrastructure Capital Advisors, said, "The market is clearly gaining momentum ahead of the PCE report."

Market consensus favors the Fed beginning interest rate cuts in June. According to the Chicago Mercantile Exchange (CME) FedWatch, the futures market reflects about a 63% probability that the Fed will cut rates by 0.25 percentage points at the June FOMC meeting. The likelihood that rates will remain unchanged through the March and May FOMC meetings stands at around 80%.

Bitcoin prices surpassed $60,000 for the first time in 27 months. With an unstoppable upward trend, it briefly surged to around $64,000, bringing the historic high of $68,982 from November 2021 within reach. This rise is attributed to continued inflows into Bitcoin spot exchange-traded funds (ETFs) following their approval, along with growing price expectations ahead of the Bitcoin halving scheduled for April. Among investors, there is also a confirmed FOMO (Fear of Missing Out) sentiment, as they do not want to be left out of the Bitcoin rally.

In the New York bond market on this day, Treasury yields declined. The benchmark 10-year U.S. Treasury yield hovered around 4.26%, while the 2-year yield, sensitive to monetary policy, was around 4.65%. The dollar index, which measures the value of the U.S. dollar against six major currencies, remained steady at about 103.9.

International oil prices also fell slightly as the market awaited the PCE price index, marking the first decline in three trading days. On the New York Mercantile Exchange, April delivery West Texas Intermediate (WTI) crude oil closed at $78.54 per barrel, down 33 cents (0.42%) from the previous day.