[New York Stock Market] Mixed Close Amid Tech Stock Strength... Nvidia Surges 7%, S&P and Nasdaq Rise

NVIDIA rebounds in four days
Fed insiders split on inflation and interest rate outlook
May PCE inflation data released on 28th draws attention

The three major indices of the U.S. New York stock market closed mixed on the 25th (local time). Nvidia, which had fallen more than 6% the previous day, surged nearly 7%, driving gains in the S&P 500 and Nasdaq indices. Investors are awaiting the release of the Personal Consumption Expenditures (PCE) price index scheduled for this week.

[Image source=Yonhap News]

On that day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 39,112.16, down 299.05 points (0.76%) from the previous trading day. The large-cap-focused S&P 500 rose 21.43 points (0.39%) to 5,469.3, and the tech-heavy Nasdaq index gained 220.84 points (1.26%) to close at 17,717.65.

By stock, Nvidia surged 6.76%. After recording its largest decline since April 19 at 6.68% the previous day and falling for three consecutive days, it rebounded after four days. Super Micro Computer rose 1.95%, and Qualcomm increased by 0.66%. Alphabet, Google's parent company, rose 2.65%, and Meta, Facebook's parent company, gained 2.34%. SolarEdge Technologies fell 20.6% after announcing plans to issue $300 million in convertible bonds. Pool Corporation dropped 8.05% following a downward revision of its earnings forecast.

Chris Zaccarelli, Chief Investment Officer (CIO) of Independent Advisor Alliance, said, "Tech stocks are leading again, and Nvidia is being bought after the decline," adding, "This year is still the year of technology and artificial intelligence (AI)." He further analyzed, "Valuations are certainly quite high, but the AI rally has much more substance than the dot-com bubble," and diagnosed, "All the well-performing stocks have good earnings."

Jeff DeGraff, Head of Technical Analysis at Renaissance Macro Research, said, "The good news is that Nvidia is still in a long-term uptrend," adding, "In my opinion, this kind of correction is probably a buying opportunity, and investors need to calm their sentiment."

The market is focusing on the May PCE price index to be released on the 28th. With the consumer price index (CPI) and producer price index (PPI) growth rates both easing last month, the PCE inflation is also expected to have slowed. The market expects the May core PCE price to rise 0.1% month-over-month and 2.6% year-over-year, both below the previous month's figures (0.2%, 2.8%). If the slowdown in the core PCE price, the inflation indicator most closely watched by the Federal Reserve (Fed), is confirmed, expectations for interest rate cuts will rise, and the New York stock market is expected to continue its rally.

Meanwhile, Fed officials expressed differing views on inflation outlook and the timing of interest rate cuts.

Michelle Bowman, Fed Governor, attending an event in London, UK, said, "We are not yet at the appropriate time to lower the policy rate," adding, "We do not expect rate cuts this year and have pushed back the timing of cuts to the future." Regarding the inflation outlook, she assessed "many upside risks" and even mentioned the possibility of further rate hikes. She said, "If inflation progress stalls or reverses, we are willing to raise the federal funds rate target range at future meetings," and added, "We will maintain a cautious approach considering risks and uncertainties in the economic outlook when considering policy changes."

On the other hand, some Fed officials forecast a continued slowdown in inflation and indicated that rates will be cut at some point.

Lisa Cook, Fed Governor, attending the New York Economic Club event, said, "If inflation makes significant progress and the labor market gradually eases, it will be appropriate at some point to reduce the policy constraint level to maintain a healthy balance in the economy." She did not specify the timing of rate cuts. She forecast that inflation will continue to decline over the next 3 to 6 months along a "bumpy path" and will slow more sharply next year. She expected housing service inflation to fall reflecting a slowdown in new rents, core goods prices to remain negative, and non-housing core services prices to ease over time.

The market is betting on rate cuts within the year but sees the possibility of one to two cuts. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on that day priced in a 65.9% chance that the Fed will cut rates by at least 0.25 percentage points at the September FOMC meeting. The probability of a 0.25 percentage point or more cut in November is 78.6%. Accordingly, the May PCE price index to be released on the 28th is expected to be quite important for the Fed's future rate decisions.

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

Earnings reports from major U.S. semiconductor companies such as Micron will also continue.

Government bond yields were steady. The 2-year U.S. Treasury yield, sensitive to monetary policy, and the 10-year U.S. Treasury yield, a global bond benchmark, traded around 4.74% and 4.24%, respectively.

International oil prices fell. West Texas Intermediate (WTI) crude oil closed at $80.83 per barrel, down $0.80 (1%) from the previous trading day, and Brent crude, the global oil price benchmark, closed at $85.01, down $1.00 (1.2%).