[New York Stock Market] Mixed Close Ahead of FOMC... Apple Surges 7.3% on 'AI Competition Entry'

Apple Stock Surpasses $200, New High
Focus on FOMC Dot Plot and May CPI on 12th

The three major indices of the U.S. New York stock market closed mixed on the 11th (local time). With the Federal Open Market Committee (FOMC) regular meeting scheduled for two days starting that day and the May Consumer Price Index (CPI) announcement the following day, a cautious stance deepened, resulting in no clear direction. Apple, which announced its artificial intelligence (AI) strategy the previous day, surged more than 7%, hitting an all-time high, pushing the S&P 500 and Nasdaq indices to new record highs as well.

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On that day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average fell 120.62 points (0.31%) from the previous trading day to close at 38,747.42. The large-cap-focused S&P 500 rose 14.53 points (0.27%) to 5,375.32, and the tech-heavy Nasdaq jumped 151.02 points (0.88%) to 17,343.55, marking an all-time high.

By stock, Apple surged 7.26%. The company's first AI service, "Apple Intelligence," unveiled at the annual Worldwide Developers Conference (WWDC) that opened the day before, raised expectations that it would expand iPhone replacement demand, boosting the stock price. On Wall Street, including Morgan Stanley and Bank of America (BoA), there were numerous forecasts that this AI feature would accelerate the iPhone replacement cycle. As a result, after falling 1.91% the previous day, Apple's stock soared, breaking the $200 mark for the first time ever at $207.15 per share, setting a new record high. U.S. automaker General Motors (GM) rose 1.35% after announcing a $6 billion share buyback plan. Nvidia, on its second trading day after a 10-for-1 stock split, fell 0.71%. JPMorgan Chase and American Express declined 2.63% and 3.34%, respectively.

Investors are focusing on the fourth regular FOMC meeting of the year, held over two days starting that day. The Federal Reserve (Fed) is highly likely to keep the benchmark interest rate unchanged at 5.25?5.5% for the seventh consecutive time immediately after the FOMC meeting the next day. 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) that interest rates would be cut three times by 0.25 percentage points each this year, but this time, it is expected that the number of rate cut forecasts will be reduced to two or fewer.

The interest rate futures market now strongly reflects the possibility of the first rate cut in November. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds rate futures market on that day priced in about a 52% chance that the Fed will cut rates by at least 0.25 percentage points at the September FOMC. The probability of a cut in November is 67%.

Marco Kolanovic, Chief Equity Strategist at JPMorgan, said, "Expectations for easing this year are decreasing," and predicted, "The Fed's first rate cut is expected in November."

Before the Fed's rate decision and dot plot release on the 12th, the May CPI will also be announced that morning. Experts expect that last month's CPI and core CPI rose 3.4% and 3.5%, respectively, year-on-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 fallen by 0.1 percentage points compared to the previous month. Attention is focused on whether the core CPI inflation rate, which hit a three-year low in April, continued to slow in May. With recent employment data mixed, the market is expected to try to gauge clues about the future interest rate path through the May CPI figures.

Zachary Hill, Senior Portfolio Manager at Horizon Investments, said, "Two big events, the CPI data and the Fed meeting, are scheduled for midweek," adding, "Before that, we are spending time waiting."

The National Federation of Independent Business (NFIB) reported that the May small business optimism index was 90.5, exceeding both market expectations (89.8) and the previous month’s figure (89.7).

Government bond yields are falling. The U.S. 10-year Treasury yield, a global bond yield benchmark, dropped 7 basis points (1bp = 0.01 percentage points) from the previous trading day to 4.39%, while the 2-year Treasury yield, sensitive to monetary policy, fell 5 basis points to 4.83%.

International oil prices rose slightly as the U.S. Energy Information Administration (EIA) raised its demand forecast for this year. West Texas Intermediate (WTI) crude oil closed at $77.90 per barrel, up $0.16 (0.2%) from the previous day, and Brent crude, the global oil price benchmark, ended at $81.92, up $0.29 (0.4%).