[New York Stock Market] Mixed Close Near Flat Ahead of March CPI Announcement...

March Core CPI Expected to Rise 3.7% YoY
Likely to Hint at Fed's Future Interest Rate Path

The three major indices of the U.S. New York stock market closed mixed in a narrow range on the 9th (local time), a day before the release of the March inflation data. The market is in a cautious stance amid expectations that the timing of interest rate cuts could be pushed to the second half of the year due to strong employment and stickier-than-expected inflation.

[Image source= Xinhua News Agency]

On that day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 38,883.67, down 9.13 points (0.02%) from the previous trading day. The large-cap-focused S&P 500 rose 7.52 points (0.14%) to 5,209.91, and the tech-heavy Nasdaq index gained 52.68 points (0.32%) to close at 16,306.64.

The market is looking to gauge the future interest rate path of the U.S. Federal Reserve (Fed) through the Consumer Price Index (CPI) data for March, which will be released on the 10th. Last month’s CPI is expected to rise 3.4% year-over-year, exceeding the previous month’s increase of 3.2%. The core CPI inflation rate is forecasted to decline slightly to 3.7% year-over-year from 3.8% the previous month. On the 11th, the Producer Price Index (PPI) for March will also be released. The wholesale price index, PPI, influences the retail price index, CPI, with a time lag.

Sam Stovall, Chief Investment Strategist at CFRA Research, said, "The market is shaken by concerns about the Fed and its signals for rate cuts," adding, "If both headline CPI and core CPI come out stronger than expected, it could act as a catalyst for a market correction."

With a strong labor market and slower-than-expected inflation easing, market expectations for rate cuts have retreated, drawing increased investor attention to this CPI release. According to the March employment report released earlier by the U.S. Department of Labor, nonfarm payrolls increased by 303,000, significantly surpassing the expert forecast of 214,000. As a result, some investors are withdrawing bets on rate cuts in the first half of the year. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on this day priced in about a 57% chance that the Fed will cut rates by at least 0.25 percentage points at the June Federal Open Market Committee (FOMC) meeting, down sharply from over 72% a month ago. There is growing speculation that the inflation data for March and April will determine whether rates will be cut in June.

Marta Norton, Chief Investment Officer (CIO) of Morningstar Wealth in the U.S., said, "Considering the resilience of the economy, investors are increasingly questioning the June pivot (direction change)," and added, "A delay in rate cuts is within the range of possible outcomes, especially if March inflation rises."

This week, the minutes of the March Federal Open Market Committee (FOMC) meeting will also be released. With the Fed maintaining its projection of three rate cuts this year in the recent dot plot, investors are expected to look to the FOMC minutes released on the 10th to confirm the Fed officials’ stance on the future interest rate path.

Fed officials’ speeches will continue as well. Fed Governor Michelle Bowman and Chicago Fed President Austan Goolsbee are scheduled to speak on the 10th, while New York Fed President John Williams and Atlanta Fed President Raphael Bostic are set to speak on the 11th.

By individual stocks, Nvidia fell 2.04%. Meta and Netflix dropped 0.45% and 1.62%, respectively. Boeing declined 1.89% after its first-quarter deliveries hit the lowest level since mid-2021. Tesla rose 2.25% following a 4.9% gain the previous day, after CEO Elon Musk announced plans to unveil the RoboTaxi in early August.

Bond yields, which surged the previous day, are declining. The U.S. 10-year Treasury yield, a global bond yield benchmark, fell 7 basis points (1 bp = 0.01 percentage points) to 4.35%, while the 2-year Treasury yield, sensitive to monetary policy, dropped 5 basis points to around 4.73%.

International oil prices fell despite the collapse of ceasefire negotiations in the Gaza Strip. West Texas Intermediate (WTI) crude dropped $1.20 (1.4%) to close at $85.23 per barrel, and Brent crude fell $0.96 (1.1%) to $89.42 per barrel.