[New York Stock Market] Broad Rise Despite Wholesale Price Strength... Nasdaq Hits All-Time High

April PPI Up 0.5% MoM... Exceeds Forecast
Powell Indicates Prolonged High Interest Rates... Denies Rate Hike
Attention on April PPI Release on 15th

The three major indices of the U.S. New York stock market all closed higher on the 14th (local time). Although the U.S. wholesale prices released that day exceeded market expectations, the March figures were revised downward, and U.S. Treasury yields fell, leading to a reversal and rise in the indices. The market is focusing on the April Consumer Price Index (CPI) to be released on the 15th.

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On that day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average rose 126.6 points (0.32%) from the previous trading day to close at 39,558.11. The large-cap-focused S&P 500 index ended trading up 25.26 points (0.48%) at 5,246.68. The tech-heavy Nasdaq index closed at a record high of 16,511.18, up 122.94 points (0.75%).

By stock, GameStop surged 59.84%. Investors flocked as one of the Reddit traders who led the 2021 meme stock craze posted on the social networking service X (formerly Twitter) for the first time in three years. The meme stock AMC Entertainment Holdings also jumped 32.76%. Tesla and Nvidia rose 3.29% and 1.06%, respectively.

On the same day, the U.S. Department of Labor announced that the Producer Price Index (PPI) for April rose 0.5% month-over-month, exceeding the Dow Jones forecast of 0.3%. The April CPI rose 2.2% year-over-year, marking the highest level in a year. The core PPI, which excludes volatile energy and food prices, increased 2.4% year-over-year, the highest since August last year. Service prices contributed significantly to the PPI increase.

The rise in the wholesale price PPI exceeding last month's expectations heightened concerns in the market about inflation becoming entrenched. The PPI affects the retail price CPI with a time lag. However, the subsequent downward revision of the March PPI by 0.1 percentage points by the Department of Labor helped curb the stock market's decline.

Chris Larkin, Managing Director at Morgan Stanley E-Trade, said, "After recording inflation figures much hotter than expected, it seemed this morning that sticky inflation had completely stalled. But with last month's figures revised downward, this report did not deliver as big a shock as when it was first released."

Meanwhile, Jerome Powell, Chair of the U.S. Federal Reserve (Fed), stated that inflation is falling more slowly than expected, which could prolong the period of high interest rates.

Chairman Powell, attending the annual meeting of the Foreign Bankers Association (FBA) held in Amsterdam, Netherlands, said, "We did not expect this path to be smooth, but the inflation figures were higher than we thought," adding, "We need to be patient and allow restrictive monetary policy to take effect." He further noted that although inflation is expected to slow this year, it has not yet happened, and said, "I really think the problem is maintaining the current interest rate policy longer than initially thought." However, he reaffirmed the existing stance of not expecting interest rate hikes.

Investors are focusing on the April CPI data to be released on the 15th. The CPI exceeded market expectations in all months from January to March this year. Even if the April CPI only meets expert forecasts, the market is expected to feel relieved. However, if it again exceeds expert expectations, it could shock the market. The market expects last month's CPI to have risen 3.4% year-over-year, and the core CPI, which excludes volatile food and energy prices and shows the underlying inflation trend, to have increased 3.6% year-over-year.

Some speculate that hot inflation may persist for some time.

Megan Horneman, Chief Investment Officer (CIO) at Verdence Capital Advisors, said, "The market is somewhat complacent and is getting used to Chairman Powell's dovish (monetary easing preference) rhetoric," adding, "In my view, the more the market continues to ignore what is happening in the inflation category, the more likely it is to face a major downturn at some point."

Bond yields are declining. The U.S. 10-year Treasury yield, a global bond yield benchmark, fell 3 basis points (bp) from the previous trading day to 4.44%, and the 2-year Treasury yield, sensitive to monetary policy, traded down 3 bp to 4.82%.

International oil prices fell. West Texas Intermediate (WTI) crude oil closed at $78.02 per barrel, down $1.10 (1.39%) from the previous trading day, and Brent crude, the global oil price benchmark, ended at $82.38, down $0.98 (1.18%).