New York Stock Market Mixed Ahead of FOMC and May CPI... Nvidia Drops 3% on First Day of Split

FOMC Meeting Opens on the 12th... May CPI Also Released
Key Focus on Revised 'Dot Plot' Reflecting Fed Rate Outlook

The three major indices of the U.S. New York stock market showed mixed movements in the early trading session on the 10th (local time), hovering around the flat line. Investors are adopting a cautious stance ahead of this week’s Federal Open Market Committee (FOMC) regular meeting and the release of the May Consumer Price Index (CPI).

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As of 9:52 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average was up 0.02% from the previous close, standing at 38,804.97. The S&P 500, which is centered on large-cap stocks, was down 0.23% at 5,334.79, and the tech-heavy Nasdaq index was trading 0.39% lower at 17,065.97.

By individual stocks, Nvidia is down 3.1% on its first trading day after a 10-for-1 stock split. Generally, stock splits increase trading volume and act as a positive catalyst for price gains, but Nvidia is showing weakness on the first day of the split. Apple, expected to present an artificial intelligence (AI) blueprint at the annual Worldwide Developers Conference (WWDC) opening that day, is down 0.73%.

Market attention is focused on the fourth FOMC regular meeting of the year, scheduled for June 11-12. Earlier, the European Central Bank (ECB) initiated a pivot by cutting interest rates by 0.25 percentage points on the 6th, but the Fed is widely expected to keep the benchmark interest rate steady at 5.25-5.5% for the seventh consecutive time immediately after the FOMC meeting on the 12th.

The key issue is the revision of the dot plot reflecting FOMC members’ interest rate forecasts. In March, the Fed maintained its previous forecast (from December last year) in the dot plot that interest rates would be cut three times by 0.25 percentage points each this year. However, with the U.S. economy performing well and employment remaining strong, it is expected that the number of rate cut forecasts will be reduced to two or fewer at this meeting.

Anna Wong, Senior U.S. Economist at Bloomberg Economics, analyzed, "The new dot plot at the June FOMC meeting will likely include forecasts for two rate cuts of 0.25 percentage points each. Given the continuous decline in U.S. growth indicators, Fed Chair Jerome Powell is expected to take a relatively dovish stance at the press conference immediately following the FOMC."

The May CPI will also be released on the 12th. Last month’s CPI and core CPI are expected to have risen 3.4% and 3.5%, respectively, year-over-year. The May CPI inflation rate is expected to be the same as the previous month, while the core CPI inflation rate is forecast to have decreased by 0.1 percentage points from the previous month. Following April’s core CPI inflation rate hitting a three-year low, attention is on whether the slowdown continued last month. With employment indicators fluctuating, the market is likely to look to inflation figures for clues about the future interest rate path. According to the U.S. Department of Labor’s May employment report released earlier, nonfarm payroll employment increased by 272,000, significantly exceeding Bloomberg’s forecast of 180,000 and the previous month’s 175,000.

The interest rate futures market is pricing in the possibility of one rate cut within the year. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market on the day reflected a 50.8% chance that the Fed will cut rates by at least 0.25 percentage points at the September FOMC meeting. A probability below 60% effectively means no chance. The probabilities for rate cuts in November and December are 65.6% and 86.8%, respectively.

David Doyle, North American Economist at Macquarie, explained, "Our views on FOMC policy are mixed. On the dovish side, an increase in the unemployment rate is meaningful, while on the hawkish side, the nonfarm payroll employment figures show that labor demand is still increasing robustly."

The U.S. 10-year Treasury yield, a global benchmark for bond yields, rose 3 basis points (1bp = 0.01 percentage points) from the previous trading day to 4.46%. The 2-year U.S. Treasury yield, which is sensitive to monetary policy, traded around 4.88%, the same level as the previous trading day.

International oil prices are on the rise. West Texas Intermediate (WTI) crude oil rose $0.39 (0.52%) from the previous trading day to $75.92 per barrel, while Brent crude, the global benchmark, increased $0.31 (0.39%) to $79.93 per barrel.