[New York Stock Market] Broad Rise on Low-Price Buying Inflow... Awaiting August CPI

Rebound on Dip Buying, Rate Cut Expectations
Consumer Short- and Long-Term Inflation Outlook Stable
Investors Focused on August CPI to Be Released on the 11th

The three major indices of the U.S. New York Stock Exchange all closed higher on the 9th (local time). After experiencing the worst week last week due to weak manufacturing and employment indicators, a rebound buying spree flowed in, leading to a successful recovery. The market is awaiting the Consumer Price Index (CPI), the last major indicator to be released this week, ahead of the Federal Open Market Committee (FOMC) meeting on the 17th-18th, where a rate cut is widely expected.

On this day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average closed at 40,829.59, up 484.18 points (1.2%) from the previous trading day. The large-cap-focused S&P 500 index rose 62.63 points (1.16%) to 5,471.05, and the tech-heavy Nasdaq index jumped 193.77 points (1.16%) to close at 16,884.6.

After the New York stock market plunged last week due to concerns over the U.S. economic slowdown, bargain buying emerged. The S&P 500 fell sharply by 4.3% last week, the Nasdaq dropped 5.8%, and the Dow Jones Industrial Average declined 2.9%. The seasonal weakness typically seen in September also dampened investor sentiment.

Tom Essay, founder of The Sevens Report, said, "We are seeing technical bargain buying," adding, "Economic growth is undoubtedly losing momentum, but a soft landing is more likely than a hard landing." Adam Grissapulli, strategist at Vital Knowledge, diagnosed, "Bargain buying appears to be occurring due to oversold conditions and expectations of monetary policy support."

This week, major U.S. inflation indicators will be released one after another. On the 11th, the August Consumer Price Index (CPI) will be published. The CPI for last month is expected to rise 2.6% year-over-year, slowing from the previous month's increase of 2.9%. After the July CPI inflation rate entered the 2% range for the first time in 3 years and 4 months since March 2021 (2.6%), inflation is expected to continue its downward trend. The Producer Price Index (PPI), a wholesale price index, will be announced on the 12th, a day after the CPI release. The August PPI is forecasted to rise 0.2% month-over-month, slightly exceeding July's increase of 0.1%. If the CPI does not spike significantly beyond expectations, a rate cut at the FOMC meeting on the 17th-18th is almost certain. This is because the Federal Reserve (Fed) has indicated that inflation is steadily declining toward the 2% target.

U.S. consumers' inflation expectations also appear to remain stable. According to the August Survey of Consumer Expectations (SCE) released by the Federal Reserve Bank of New York on this day, the median expected inflation rates for 1 year and 5 years ahead were 3% and 2.8%, respectively, unchanged from July. The median expected inflation rate for 3 years rose from 2.3% in July, the lowest since 2013, to 2.5% in August.

Now, the market's focus is on the magnitude of the rate cut. Investors are anticipating a 0.25 percentage point rate cut this month. Currently, the interest rate futures market reflects a 71% probability that the Fed will lower rates by 0.25 percentage points in September and a 29% chance of a 0.5 percentage point cut.

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

By individual stocks, Nvidia rose 3.54%. Apple barely increased by 0.04% despite unveiling the new 'iPhone 16.' The iPhone 16 features Apple's first artificial intelligence (AI) function, Apple Intelligence. Boeing, the U.S. aircraft manufacturer, rose 3.36% on news of reaching a wage agreement with the union. Palantir Technologies and Dell rose 14.08% and 3.83%, respectively, following their inclusion in the S&P 500. MarineMax rose 4.34% after Citibank upgraded its investment rating from 'neutral' to 'buy.'

Government bond yields remained steady. The U.S. 10-year Treasury yield, a global bond yield benchmark, held steady at 3.7%, while the 2-year Treasury yield, sensitive to monetary policy, rose 3 basis points from the previous trading day to 3.68%.

International oil prices were firm amid concerns that production might decline as a hurricane approaches the U.S. Gulf Coast. West Texas Intermediate (WTI) crude oil closed at $68.71 per barrel, up $1.04 (1.5%) from the previous trading day, and Brent crude, the global oil price benchmark, rose $0.78 (1.1%) to close at $71.84 per barrel.