New York Stock Market Steady Amid Fed Officials' Remarks

Waller Fed Director "Monitoring Inflation Indicators for Several Months"
Focus on Nvidia Earnings and FOMC Minutes on the 22nd

The three major indices of the U.S. New York stock market showed a slight gain in early trading on the 21st (local time). The market is focusing on the remarks of Federal Reserve (Fed) officials on the day, which may provide clues about the future interest rate path.

As of 11 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average was up 0.08% from the previous close, standing at 39,840.34. The S&P 500, centered on large-cap stocks, rose 0.09% to 5,312.78, and the Nasdaq, focused on tech stocks, was trading 0.01% higher at 16,796.97.

By individual stocks, cybersecurity firm Palo Alto Networks fell 3.48% after issuing a disappointing earnings forecast the previous day. JP Morgan, whose CEO Jamie Dimon?known as the "Emperor of Wall Street"?hinted at early retirement the day before, dropped 4.5% but has rebounded 1.32% as of now. Nvidia, which is set to report earnings the next day, slipped 0.04%.

According to market research firm LSEG, Nvidia is expected to post revenue of $24.6 billion and profit of $12.83 billion for the first quarter of this fiscal year (February to April). Revenue and profit are forecasted to surge by 242% and 529%, respectively. The strong demand for artificial intelligence (AI) chips is fueling expectations that Nvidia's robust performance will continue.

Investors are turning their attention to speeches by Fed officials. On the day, Fed officials reaffirmed their stance that inflation must show further signs of slowing before any interest rate cuts. Christopher Waller, a Fed governor known as a "hawk" (favoring monetary tightening), said that before lowering rates, inflation data supporting such a move must be confirmed "for several months." However, he added, "The data shows inflation is not accelerating," and he believes "further policy rate hikes are unnecessary."

Raphael Bostic, president of the Federal Reserve Bank of Atlanta, said, "It is better to wait longer before cutting rates to ensure inflation does not rebound," and expressed a desire to avoid rushing rate cuts and to confirm that policy easing is not ambiguous. He stated, "If inflation is expected to decline relatively slowly, rate cuts should not be expected before the fourth quarter."

Case Buchan, senior portfolio manager at Globalt Investments, analyzed, "The story of disinflation (slowing inflation rate) remains intact," adding, "If corporate profitability is confirmed through earnings, the market will continue to move higher."

On the 22nd, besides Nvidia's earnings, the minutes of the Fed's May FOMC meeting will be released. Earlier, after the FOMC meeting on the 1st, the Fed kept the benchmark interest rate steady at 5.25-5.5% for the sixth consecutive time, adding a phrase to the policy statement noting that inflation has not slowed as much as expected. Fed Chair Jerome Powell said, "Confidence in the decline of inflation is weakening," but regarding rate hikes, he stated, "The likelihood is very low." The market is expected to scrutinize the FOMC minutes for Fed officials' comments on the current inflation situation and future interest rate path. Especially, with the core Consumer Price Index (CPI) for April hitting its lowest level in three years, market expectations for rate cuts within the year are rising.

Government bond yields are falling. The U.S. 10-year Treasury yield, a global bond yield benchmark, dropped 2 basis points (1bp = 0.01 percentage points) from the previous trading day to 4.41%, while the 2-year Treasury yield, sensitive to monetary policy, moved down 1bp to around 4.82%.

International oil prices are weak as Fed officials expressed cautious views on rate cuts. West Texas Intermediate (WTI) crude oil fell $1.49 (1.8%) from the previous day to $78.31 per barrel, and Brent crude, the global oil price benchmark, dropped $1.54 (1.8%) to $82.17 per barrel.