[New York Stock Market] Rise on September Rate Cut Expectations and Tech Stock Rally... S&P Breaks 5600 Level for the First Time

NVIDIA up 2.7%... TSMC up 3.5%
Powell shifts focus from 'inflation to employment'
September rate cut expectations spread
June CPI released on 11th draws attention

The three major indices of the U.S. New York stock market all closed higher on the 10th (local time). With technology stocks, including semiconductors, surging, the S&P 500 index surpassed the 5600 mark for the first time ever, and the Nasdaq index also hit a record high. The rally in tech stocks was supported by Federal Reserve Chairman Jerome Powell's congressional remarks the previous day, which fueled expectations of a rate cut in September. The market is awaiting the release of the June Consumer Price Index (CPI) scheduled for the next day.

[Image source=Yonhap News]

On that day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average, centered on blue-chip stocks, closed at 39,721.36, up 429.39 points (1.09%) from the previous trading day. The large-cap-focused S&P 500 index rose 56.93 points (1.02%) to 5,633.91, and the tech-heavy Nasdaq index jumped 218.16 points (1.18%) to 18,647.45, setting another all-time high.

By individual stocks, semiconductor shares surged sharply. Taiwan foundry (semiconductor contract manufacturing) company TSMC rose 3.54%. This was driven by second-quarter sales of 673.51 billion Taiwan dollars, significantly exceeding market research firm LSEG's forecast of 654.27 billion Taiwan dollars, attracting strong buying interest. U.S. semiconductor companies Qualcomm and Broadcom increased by 0.81% and 0.66%, respectively. AI leader Nvidia jumped 2.69%. Apple rose 1.88% after it was reported that the company set its iPhone shipment target for the second half of this year at 90 million units, a 10% increase from a year ago. Tesla rose 0.35%, extending its winning streak to 11 consecutive trading days.

Scott Welch, Chief Investment Officer (CIO) at Satuiti, commented on tech stocks, saying, "Some stocks appear to be in a bubble, but there are no signs yet that earnings fail to support stock prices." However, he added, "Since 7 to 10 tech stocks account for 30-40% of the S&P 500 market capitalization, any price decline could have an amplified effect."

The market closely watched Powell's remarks, who appeared before the House for the semiannual monetary policy report following his Senate appearance the previous day. He said, "We have some confidence in the decline of inflation," but added, "The question is whether we have enough confidence that inflation will sustainably fall to 2%, and we are not yet ready to say that." Regarding recent inflation indicators, he reaffirmed his Senate remarks from the previous day, stating there has been "modest further progress" and that "more good data" would strengthen the central bank's confidence that inflation is slowing toward 2%.

Powell also reiterated that while the Fed's monetary policy had so far focused on price stability, it is now also focusing on full employment. He stated, "The mission regarding inflation is not over yet, and there is more work to do," and added, "Policymakers are paying close attention despite significant easing in the labor market."

The Fed currently maintains the benchmark interest rate at 5.25-5.5% for a year. This is the highest level in 23 years, resulting from 11 consecutive rate hikes since March 2022. The market expects the Fed to hold rates steady at the July Federal Open Market Committee (FOMC) meeting and begin cutting rates in September.

Market attention is focused on the June CPI data, which will support the Fed's rationale for rate cuts. The CPI for last month, to be released on the 11th, is expected to rise 3.1% year-over-year, below May's increase of 3.3%. After the CPI increases in April and May (3.4% and 3.3%, respectively) both fell below the previous months' figures (3.5% and 3.4%), the key question is whether the three-month consecutive slowdown in CPI will continue. The core CPI, excluding volatile food and energy prices, is expected to have risen 3.4% in June, matching May's increase. On the following day, the June Producer Price Index (PPI) will be released. The PPI is forecast to have risen 0.1% month-over-month in June, surpassing May's -0.2% figure.

Mark Hacket, Chief Investment Researcher at Nationwide, analyzed, "Despite the flood of data this week?including Powell's testimony, CPI and PPI reports, and corporate earnings season?the market remains calm," adding, "It could be influenced by the CPI figures."

U.S. Treasury yields were slightly lower. The 10-year U.S. Treasury yield, a global bond yield benchmark, fell 1 basis point (1 bp = 0.01 percentage point) to 4.28% compared to the previous trading day, while the 2-year Treasury yield, sensitive to monetary policy, traded steady at around 4.62%.

International oil prices rose on expectations of declining U.S. inventories and increased demand. West Texas Intermediate (WTI) crude oil closed at $82.10 per barrel, up $0.69 (0.85%) from the previous day, while Brent crude, the global oil price benchmark, ended at $85.08 per barrel, up $0.42 (0.5%).