New York Stock Market Rises on Rebound Buying... Focus on August CPI

Attempted Rebound on Low-Price Buying and Interest Rate Cut Expectations
Investors Await August CPI Release on the 11th

The three major indices of the U.S. New York Stock Exchange are showing an upward trend on the 9th (local time). The market, which fell last month due to nonfarm payroll increases falling short of expectations, is attempting a rebound fueled by bargain buying and hopes for an interest rate cut next week. Investors are focusing on the Consumer Price Index (CPI), the last major indicator to be released this week ahead of the Federal Open Market Committee (FOMC) meeting scheduled for the 17th-18th.

As of 10:20 a.m. in the New York stock market, the blue-chip-focused Dow Jones Industrial Average is trading at 40,770.41, up 1.05% from the previous trading day. The large-cap-focused S&P 500 index is up 0.97% at 5,460.66, and the tech-heavy Nasdaq index is up 1.03% at 16,862.15.

Last week, the New York stock market experienced its worst week this year amid concerns over a U.S. economic slowdown following the release of manufacturing and employment data. The S&P 500 index plunged 4.3%, marking its largest weekly drop since March last year. The Nasdaq index fell 5.8%, recording its biggest weekly decline since 2022. The Dow Jones Industrial Average dropped 2.9% last week. The seasonal weakness typically seen in September also worsened investor sentiment.

The U.S. Department of Labor's August employment report released on the 6th significantly dragged down the indices. According to the report, nonfarm payrolls increased by 142,000 last month. Although this was an improvement from the revised July figure of 89,000, it was below the forecast of 164,000. The unemployment rate matched expectations at 4.2%, down from 4.3% in July. The report contained both positive and negative factors, leading to a mixed market start, but the market plunged after Fed Governor Christopher Waller left open the possibility of a 0.5 percentage point 'big cut' in interest rates. Investors grew concerned about the possibility of a recession.

Adam Griesafulli, strategist at Vital Knowledge, analyzed the market rebound on the first trading day of this week, saying, "It appears that bargain buying is occurring due to oversold conditions and expectations of monetary policy support."

This week, major U.S. inflation indicators will be released consecutively. On the 11th, the August Consumer Price Index (CPI) will be announced. The CPI is expected to have risen 2.6% year-over-year, slowing from the previous month's increase of 2.9%. After the July CPI rise entered the 2% range for the first time in three years and four months since March 2021 (2.6%), inflation is expected to continue its downward trend. The Producer Price Index (PPI), a wholesale price indicator, will be released on the 12th, one day after the CPI. The August PPI is expected to rise 0.2% month-over-month, slightly exceeding July's 0.1% increase. If the CPI does not exceed expectations with a sharp jump, an interest rate cut at the FOMC meeting on the 17th-18th is almost certain. This is because inflation is steadily declining toward the Fed's 2% target as forecasted.

The market's focus is on the size of the rate cut. Investors are anticipating a 0.25 percentage point rate cut this month. Currently, the interest rate futures market reflects a 73% probability that the Fed will cut rates by 0.25 percentage points in September and a 27% chance of a 0.5 percentage point cut.

Vincent Deluard, global macro strategist at StoneX, said, "The CPI is expected to meet market consensus, and the PPI is not very important. Powell wants to cut rates, but as a reasonable person, he will not risk a 50 basis point (1bp=0.01 percentage point) cut in September."

By individual stocks, U.S. aircraft manufacturer Boeing is up 3.92% on news of reaching a wage agreement with its union. Palantir Technologies and Dell are rising 11.54% and 4.62%, respectively, following their inclusion in the S&P 500. MarineMax is up 4.39% after Citibank upgraded its investment rating from 'neutral' to 'buy.'

Government bond yields are rising. The U.S. 10-year Treasury yield, a global bond yield benchmark, is up 2 basis points from the previous trading day at 3.72%, while the 2-year Treasury yield, sensitive to monetary policy, is up 3 basis points at 3.68%.

International oil prices are firm amid concerns that production may decline as a hurricane approaches the U.S. Gulf Coast. West Texas Intermediate (WTI) crude oil is up $0.19 (0.28%) from the previous trading day at $67.86 per barrel, and Brent crude, the global oil price benchmark, is up $0.16 (0.23%) at $71.22 per barrel.