[New York Stock Market] Mixed Close Awaiting February PCE Inflation... Dow and S&P 500 Hit Record Highs

US Stock Value Increased by $4 Trillion in Q1
US GDP Growth Rate 3.4% in Q4 Last Year
February PCE Inflation Data Released on 29th in Focus

The three major indices of the U.S. New York stock market closed mixed in a narrow range on the 28th (local time). The market is in a cautious wait-and-see mode ahead of the release of the Personal Consumption Expenditures (PCE) price index on the 29th. The Dow Jones Industrial Average and the S&P 500 both hit record highs.

[Image source=Yonhap News]

On that day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 39,807.37, up 47.29 points (0.12%) from the previous trading day. The large-cap-focused S&P 500 closed at 5,254.35, up 5.86 points (0.11%). Both indices recorded all-time highs. The tech-heavy Nasdaq index closed down 20.06 points (0.12%) at 16,379.46.

The three major indices of the New York stock market ended the first quarter of this year with gains, causing the value of U.S. stocks to surge by $4 trillion during this period. The S&P 500 surged 10.2% in the first quarter, marking the largest increase in four years since the first quarter of 2019 (13.1%). The Dow Jones Industrial Average rose 5.6% during the same period, the largest gain since the first quarter of 2021 (7.4%). The Nasdaq index increased by 9.1% in the first quarter. On a monthly basis, the upward trend of the three major indices was also notable. The S&P 500 jumped 3.1% this month, while the Dow Jones Industrial Average and Nasdaq rose 2.1% and 1.8%, respectively. The superstar of the New York stock market was Nvidia, a leader in artificial intelligence (AI), which soared 83% in the first quarter.

Lori Calvasina, Head of U.S. Equity Strategy at RBC Capital Markets, said, "Ultimately, it is the market's perspective, rather than economists' or strategists' views on where economic fundamentals are headed, that determines stock prices." Art Hogan, Chief Market Strategist at B. Riley Wealth, analyzed, "The biggest data comes out on Friday when the market is closed. Investors are feeling more energized and are leading the market with a greater willingness to take risks."

The U.S. economy's robust growth was reaffirmed by the GDP growth rate indicator released that morning. The U.S. Department of Commerce announced that the final GDP growth rate for the fourth quarter of last year was 3.4% annualized, revised upward by 0.2 percentage points from the preliminary figure of 3.2% announced last month. The U.S. economic growth rate is released in three stages: advance, preliminary, and final, and unlike Korea, it is presented as an annualized growth rate compared to the previous quarter (seasonally adjusted). Strong consumer spending and increased corporate investment in non-residential structures such as factories were reflected.

Jeremy Straub, CEO of Coastal Wealth, said, "The GDP figures confirmed the economy's strength. While a Fed rate cut would be welcome news for stocks, it is not a necessary condition for a bull market. The market has rallied over the past 18 months despite high interest rates."

Consumer sentiment improved, and expected inflation declined. The University of Michigan's final consumer sentiment index for March was 79.4, the highest since July 2021. It exceeded both the previous month’s figure (76.9) and expert forecasts (76.5). Expected inflation one year ahead was 2.9%, and five years ahead was 2.8%, both down 0.1 percentage points from the previous month.

Accordingly, expectations for a soft landing of the economy are spreading. The American Bankers Association (ABA) Economic Advisory Committee, composed of economists from major U.S. banks, stated in its latest forecast that the probability of a U.S. recession is estimated at about 30%. This is a significant drop from the 50% recession probability forecasted in September last year.

The labor market remains strong. The U.S. Department of Labor announced that new unemployment claims for the week of March 17-23 totaled 210,000, slightly below market expectations of 212,000. This was unchanged from the revised figure of 212,000 the previous week. Compared to the pre-COVID-19 pandemic period, this remains a historically low level.

The market is closely watching the February Personal Consumption Expenditures (PCE) price index to be released on the 29th. The core PCE price in February is expected to have risen 0.3% month-over-month, a smaller increase than January’s 0.4%. However, the annual increase is expected to remain steady at 2.8%, the same level as January. Since the Consumer Price Index (CPI) exceeded expert forecasts for two consecutive months in January and February this year, attention is focused on the PCE price trend. However, since the 29th is Good Friday, a holiday before Easter, market reactions to the inflation data are expected to be confirmed after the New York stock market opens on April 1.

CEO Straub predicted, "If the PCE price index released on the 29th meets or comes close to expectations, the Fed is likely to cut rates three times this year." Chief Market Strategist Hogan said, "Next week, there will be much more data. We will have more catalysts to advance the situation." He added, "Overall, this month and this quarter have been really good."

By individual stocks, Nvidia rose 0.12%. Home Depot, which announced it would acquire building materials distributor SRS Distribution for $18.25 billion, fell 0.62%. Walgreens Boots Alliance rose 3.62%. Although the company reported second-quarter results exceeding expectations, it lowered its outlook for fiscal year 2024. Trump Media & Technology Group (TMGT), the parent company of Truth Social, a social networking service founded by former U.S. President Donald Trump, fell 6.43% on its third day debuting on the New York stock market.

Government bond yields are on the rise. The U.S. 10-year Treasury yield, a global bond yield benchmark, rose 1 basis point (bp = 0.01 percentage points) from the previous day to 4.21%, while the U.S. 2-year Treasury yield, sensitive to monetary policy, fluctuated around 4.62%, up 5 basis points.

International oil prices are rising due to production cuts by oil-producing countries and concerns over Ukrainian attacks on Russian refining facilities. West Texas Intermediate (WTI) May futures rose $1.82 (2.2%) from the previous trading day to $83.17 per barrel, and Brent crude May futures rose $1.39 (1.6%) to $87.48 per barrel.