[New York Stock Market] Mixed Close Ahead of May PCE Inflation Data... Nvidia Down 6.7%

May 28 PCE Inflation Data Released
Expected 2.6% YoY Increase...Slower Than Previous Month
Micron, Nike, and Others Report Earnings

The three major indices of the U.S. New York stock market closed mixed on the 24th (local time). Amid recent fatigue from the sharp rise in the stock market, investors entered a pause mode while awaiting the Personal Consumption Expenditures (PCE) price index to be released this week. AI leader Nvidia fell nearly 7% on the day, continuing a three-day decline after becoming the largest market cap company last week.

On the day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average rose 260.88 points (0.67%) from the previous trading day to close at 39,411.21, supported by gains in bank and energy stocks. The large-cap S&P 500 index fell 16.75 points (0.31%) to 5,447.87, and the tech-heavy Nasdaq index dropped 192.54 points (1.09%) to 17,496.82.

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By stock, Nvidia fell 6.68%. After surpassing Microsoft (MS) to become the largest market cap company on the 19th, fatigue accumulated, resulting in a three-day consecutive decline. Apple rose 0.31% despite receiving a preliminary investigation notice from the European Union (EU) Commission stating that its App Store regulations violated the Digital Markets Act (DMA). Carrier Global rose 2.81% after Citigroup upgraded its investment rating from 'neutral' to 'buy.' JP Morgan Chase and Goldman Sachs jumped 1.31% and 2.65%, respectively, while Chevron also rose 2.6%.

Katie Nixon, Chief Investment Officer (CIO) at Northern Trust Asset Management, said about Nvidia, "Extreme price performance may encounter some slowdown going forward," adding, "This is more about paying closer attention to how far and how fast the stock has moved rather than a fundamental issue with the giant AI company."

This week, investors' attention turns to the May PCE price index to be released on the 28th. With both the Consumer Price Index (CPI) and Producer Price Index (PPI) growth rates easing last month, the PCE inflation is also expected to have slowed. The market expects the May core PCE inflation to rise 0.1% month-over-month and 2.6% year-over-year, both below the previous month's figures (0.2% and 2.8%). If the slowdown in the core PCE inflation, the Fed's most closely watched inflation gauge, is confirmed, expectations for rate cuts will rise, likely continuing the rally in the New York stock market.

Earlier, the Fed reduced its forecast for the number of rate cuts this year from three to one. The market currently anticipates one to two rate cuts within the year amid the recent inflation slowdown trend. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on the day reflected a 67.7% probability that the Fed will cut rates by at least 0.25 percentage points at the September Federal Open Market Committee (FOMC) meeting. The probability of a 0.25 percentage point or more cut in November is 79.8%.

Lee Hardman, strategist at MUFG Bank, said, "We expect to confirm the inflation slowdown, which is progress the Fed should welcome," adding, "If inflation indicators ease further, they may signal a rate cut in September during the summer."

On the other hand, David Rubenstein, co-founder of the U.S. private equity firm Carlyle Group, predicted that the Fed will not cut rates before the November presidential election. Rubenstein told CNBC, "Generally, the Fed wants to keep politics at a distance," adding, "The Fed has said it will not cut rates before the election, and if it does so earlier, it would cause significant political turmoil." Above all, he believes the Fed is fully aware that cutting rates before the election would face strong criticism from former President Donald Trump.

On the 27th, the final figure for the U.S. first-quarter Gross Domestic Product (GDP) and last week's new unemployment claims will also be released. The final GDP figure is expected to be 1.3% annualized quarter-over-quarter, the same as the preliminary estimate. New unemployment claims are expected to have slightly increased to 240,000 from the previous week's 238,000.

Fed officials will continue to speak this week. Fed Governors Lisa Cook and Michelle Bowman, and Thomas Barkin, President of the Richmond Federal Reserve Bank, are scheduled to speak.

This week will also see earnings reports from major companies such as Micron, FedEx, Walgreens Boots Alliance, and Nike.

U.S. Treasury yields remained steady. The 2-year U.S. Treasury yield, sensitive to monetary policy, stayed at 4.73%, the same as the previous trading day, while the 10-year U.S. Treasury yield, a global bond yield benchmark, fell 1 basis point (1 bp = 0.01 percentage points) to 4.24%.

International oil prices rose due to strong summer oil demand and geopolitical tensions. West Texas Intermediate (WTI) crude oil closed at $81.63 per barrel, up $0.90 (1.1%) from the previous day, while Brent crude, the global oil price benchmark, rose $0.77 (0.9%) to $86.01.