[New York Stock Market] Awaiting FOMC, S&P 500 Hits Record High... Treasury Yields Down, Nvidia Up 1%

Decline in Government Bond Yields Stimulates Investor Sentiment
Focus on June 20 FOMC Meeting Results

The three major indices of the U.S. New York stock market all closed higher on the 18th (local time). Nvidia, which unveiled its next-generation artificial intelligence (AI) chip the previous day, reversed its decline and rose, while bond yields, which had surged on expectations of a delayed interest rate cut, fell, stimulating investor sentiment. Investors' attention is focused on the results of the Federal Open Market Committee (FOMC) monetary policy meeting to be released on the 20th.

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On this day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 39,110.76, up 320.33 points (0.83%) from the previous trading day. The large-cap-focused S&P 500 index rose 29.09 points (0.56%) to 5,178.51, setting a new all-time high. The Nasdaq index closed at 16,166.79, up 63.34 points (0.39%).

By stock, Nvidia rose 1.07%. Despite initially falling in early trading following the unveiling of the next-generation AI chip B100 based on the new graphics processing unit (GPU) Blackwell, it reversed course and closed higher. Microsoft (MS), which plans to acquire AI startup Inflection, rose 0.98%. On this day, MS announced it would recruit Mustafa Suleyman, co-founder of Google DeepMind and CEO of Inflection AI. Super Micro Computer, a beneficiary of AI, plunged 8.96% on news of a stock offering. MicroStrategy, known as the largest holder of Bitcoin, fell 5.67%. Apple, which had risen the previous day on news that it is discussing embedding Google's AI chatbot Gemini into the iPhone, rose 1.36% this day. Alphabet, Google's parent company, fell 0.38%.

Bond yields fell, driving the stock market higher. The U.S. 10-year Treasury yield, a global bond yield benchmark, moved around 4.28%, down 5 basis points (bp) (1 bp = 0.01 percentage points) from the previous trading day. The 2-year U.S. Treasury yield, sensitive to monetary policy, rose 4 bp to around 4.68%.

Christian Mueller-Glissmann, strategist at Goldman Sachs, said, "Stock momentum is somewhat supporting broad risk appetite," adding, "Unless there is a significant interest rate shock in the U.S., the impact of a sustained reversal is expected to be limited."

Investors' attention is focused on the FOMC monetary policy meeting results to be released the next day. At this second meeting of the year, the U.S. Federal Reserve (Fed) is widely expected to keep the benchmark interest rate steady at the current 5.25-5.5% range.

The key question is whether the Fed will revise the dot plot, which shows economic and interest rate forecasts. Previously, at the December FOMC meeting last year, the Fed projected the median federal funds rate for this year to be 4.5-4.75%, anticipating three 0.25 percentage point rate cuts over the year. However, with inflation proving stronger than expected, concerns have arisen that the Fed may signal a prolonged period of high rates.

The market's timing expectations for rate cuts are retreating. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market on this day priced in about a 59% chance that the Fed will cut rates by 0.25 percentage points at the June FOMC meeting, down from 69.2% a week ago. There is growing speculation that the first rate cut by the Fed may be in July rather than June.

Goldman Sachs, a U.S. investment bank (IB), revised its forecast for the number of rate cuts this year from four to three. It expects the Fed to cut the benchmark rate by 0.25 percentage points three times starting in June. With sticky inflation repeatedly confirmed, the Fed is expected to delay the timing of monetary easing.

Sam Millette, bond director at Commonwealth Financial Network, said, "The Fed will provide a lot of oxygen as it wraps up the March meeting," adding, "The market does not expect rate changes at this meeting or the next, but March will be a really interesting meeting."

International oil prices are on the rise. This is due to geopolitical concerns following Ukraine's attack on Russian refining facilities and supply-demand mismatches. West Texas Intermediate (WTI) crude oil rose $0.75 to $83.47 per barrel, while Brent crude increased $0.49 to $87.38 per barrel.