[New York Stock Market] Mixed Close Amid Pause in Anticipation of Interest Rate Cut...

Neel Kashkari "Cannot Rule Out Possibility of Interest Rate Hike"

The three major indices of the U.S. New York stock market closed mixed in a narrow range on the 7th (local time). The New York stock market, which had risen on expectations of interest rate cuts, took a breather as investors gauged the future interest rate path through remarks by Federal Reserve (Fed) officials.

On this day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 38,884.26, up 31.99 points (0.08%) from the previous trading day. The large-cap-focused S&P 500 index rose 6.96 points (0.13%) to 5,187.7, while the tech-heavy Nasdaq index fell 16.69 points (0.1%) to close at 16,332.56.

By individual stocks, Apple, which released new iPad Pro and Air models on the day, rose 0.38%. Walt Disney fell 9.51% after its earnings announcement. Disney's first-quarter earnings per share (EPS) of $1.21 exceeded market research firm Refinitiv's estimate of $1.10, but its revenue of $22.08 billion fell short of expectations. Palantir, a U.S. defense industry company, dropped 15.15% after reporting earnings below market expectations.

Neil Kashkari, president of the Minneapolis Federal Reserve Bank and known as a prominent hawk (favoring monetary tightening) within the Fed, stated that he does not rule out the possibility of further interest rate hikes. Speaking at the 'Milken Global Conference 2024' held at the Beverly Hilton Hotel in Los Angeles (LA), he said, "I believe there is a high need for interest rates to remain at the current level for an extended period." He added, "Until we confirm the effects of monetary policy, it is likely that we will stay at this level much longer than currently expected or anticipated by the public. While it is not the most likely scenario, we cannot rule out (interest rate hikes)."

President Kashkari also mentioned that the Fed's current monetary policy might not be sufficiently restrictive. In a post on the Minneapolis Fed website that day, he pointed out, "Recent data, from a strong housing market to persistent demand strength, suggest that the Fed's policy may not be as restrictive as officials think," and noted, "Inflation could stabilize around 3%."

He was cautious about the interest rate path for this year. When asked about the rate path at the conference, he said, "In March, I penciled in two rate cuts by the end of this year, but I am not sure where we will be in June. We could stay at two cuts or even zero cuts. We need to look at the data comprehensively."

This stance contrasts with the more dovish (favoring monetary easing) messages from Fed officials the previous day, who viewed current rates as sufficiently restrictive.

John Williams, president of the New York Federal Reserve Bank, attending the Milken Global Conference the day before, said, "Current monetary policy is in a very good position," and added, "I expect the benchmark interest rate to be cut." Thomas Barkin, president of the Richmond Fed, also said at the South Carolina Columbia Rotary Club the previous day, "I am optimistic that the current restrictive interest rate level will suppress demand and bring inflation back to target levels."

As a result, the market appears to be seeking additional clues about the future interest rate path from upcoming remarks by Fed officials. On the 10th, speeches by Fed Governor Michelle Bowman and Fed Vice Chair for Supervision Michael Barr are scheduled.

Rob Haworth, senior investment strategist at US Bank, analyzed, "The market seems to be looking for some decisive solution regarding the inflation situation. Inflation is still persistent but is not accelerating to problematic levels. There is room to hold risk assets."

The U.S. 10-year Treasury yield, a global bond yield benchmark, is trading around 4.45%, down 2 basis points (1bp = 0.01 percentage points) from the previous trading day. The 2-year Treasury yield, sensitive to monetary policy, remains near 4.83%, similar to the previous day.

International oil prices fell on signs of easing supply concerns. West Texas Intermediate (WTI) crude oil closed at $78.38 per barrel, down $0.10 from the previous day, and Brent crude, the global oil price benchmark, fell $0.17 to close at $83.16.