[New York Stock Market] US Fed Signals Delay in Rate Cut, Dow Falls 0.51%...

FOMC Minutes "Questioning Whether Current Interest Rates Are Restrictive"
Some Fed Officials Mention Possibility of Rate Hike
Focus on Nvidia Earnings Release After Market Close

The three major indices of the U.S. New York stock market all closed lower on the 22nd (local time). At the May Federal Open Market Committee (FOMC) meeting released that day, Federal Reserve (Fed) officials indicated that they would maintain the current interest rate level longer than initially expected due to inflation concerns, and some even mentioned the possibility of further rate hikes, which dampened investor sentiment.

On that day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 39,671.04, down 201.95 points (0.51%) from the previous trading day. The large-cap-focused S&P 500 index fell 14.4 points (0.27%) to 5,307.01, and the tech-heavy Nasdaq index dropped 31.08 points (0.18%) to close at 16,801.54.

Investor sentiment sharply declined following the release of the May FOMC minutes. The minutes stated, "Participants were disappointed by the first-quarter inflation figures" and "It appears it will take longer than previously expected to gain greater confidence that inflation is consistently moving toward 2%."

According to the minutes, Fed officials noted that while inflation had eased over the past year, there had been insufficient progress toward the 2% target in recent months. They also expressed concerns about inflation risks due to geopolitical impacts and the pressure inflation places on low-wage consumers.

In particular, Fed officials continued discussions on whether the current monetary policy is sufficiently restrictive. Overall, they viewed the current interest rates as restrictive but pointed out that the effect of high rates might be smaller than before or that the neutral rate might be higher than expected.

The minutes stated, "Many participants mentioned uncertainty about the degree of restrictiveness," and some noted, "If inflation risks materialize, they are willing to further tighten policy if appropriate." Some Fed officials even mentioned the possibility of additional rate hikes.

In fact, the day before, Fed officials reaffirmed their stance that inflation slowdown must be further confirmed before cutting rates. Fed Governor Christopher Waller said that before lowering rates, inflation data supporting such a move must be confirmed "for several months." However, he dismissed the possibility of further rate hikes. Raphael Bostic, President of the Federal Reserve Bank of Atlanta, said, "It is better to wait longer before cutting rates to prevent inflation from rebounding," adding, "If inflation is expected to decline relatively slowly, rate cuts are unlikely before the fourth quarter."

Investors were also looking forward to Nvidia's earnings released after the market close. According to market research firm LSEG, Nvidia is expected to report revenue of $24.6 billion and earnings of $12.83 billion for the first quarter of this fiscal year (February to April). With explosive demand for artificial intelligence (AI) chips, revenue and earnings are projected to surge by 242% and 529%, respectively. Nvidia's stock price has risen about 90% this year and approximately 200% over the past year, driving the AI investment boom. The key question is whether it can meet investors' heightened expectations and lead a tech stock rally. The tech-heavy Nasdaq index has risen 12% so far this year.

Henry Allen, a strategist at Deutsche Bank, assessed, "Nvidia's earnings have become one of the most important events on the macro calendar." He added, "This situation was justified by a tremendous move afterward," noting that "the day after Nvidia announced its earnings in February, the S&P 500 index surged 2.11%, marking the largest single-day gain in a year."

Tom Essaye, founder of Sevens Report Research, analyzed, "With stock prices at all-time highs, for meaningful progress beyond the current levels, investors need to confirm economic indicators that remain in the Goldilocks zone, the absence of hawkish shocks from the Fed, steady yields, retail earnings, and strong earnings outlooks from AI leaders like Nvidia."

By individual stocks, U.S. large retailer Target fell sharply by 8.03% after its first-quarter sales declined 3% year-over-year, missing market expectations. Semiconductor company Analog Devices rose 10.86% following earnings that exceeded analyst forecasts. E-commerce company Shopify jumped 2.95% after Goldman Sachs upgraded its investment rating from "neutral" to "buy."

Government bond yields are rising. The U.S. 10-year Treasury yield, a global bond yield benchmark, moved around 4.42%, up 1 basis point (1 bp = 0.01 percentage point) from the previous trading day. The 2-year U.S. Treasury yield, sensitive to monetary policy, rose 4 basis points to 4.87% compared to the previous day.

International oil prices fell amid growing concerns about demand due to the Fed's potential delay in rate cuts. West Texas Intermediate (WTI) crude closed at $77.57 per barrel, down $1.09 (1.39%) from the previous day, while Brent crude, the global oil price benchmark, fell $0.98 (1.18%) to $81.90.