[New York Stock Market] Mixed Close in Narrow Range... Awaiting Powell's Message and PCE Inflation Data

Growth Rate on 26th, PCE Inflation Release on 27th
Powell's Public Speech Scheduled for 26th

The three major indices of the U.S. New York Stock Exchange closed mixed in a narrow range on the 25th (local time). Investors are focusing on the Federal Reserve's (Fed) next rate cut size, seeking clues through various economic indicators and statements from Fed officials.

[Image source=AFP Yonhap News]

On that day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average closed at 41,914.75, down 293.47 points (0.7%) from the previous trading day. The large-cap-focused S&P 500 index fell 10.67 points (0.19%) to 5,722.26, while the tech-heavy Nasdaq index rose 7.68 points (0.04%) to close at 18,082.21.

Since the Fed implemented a "big cut" (a 0.5 percentage point reduction in the benchmark interest rate) on the 18th, investor interest in the current economic situation has increased. Amid conflicting forecasts of a soft landing and recession, investors are trying to gauge the economy through economic indicators.

Investors are anticipating the possibility of an additional big cut at the next Federal Open Market Committee (FOMC) meeting. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market on that day reflected a 60.7% chance that the Fed will cut rates by 0.5 percentage points at the regular November FOMC meeting, and a 39.3% chance of a 0.25 percentage point cut.

To estimate the future size of the Fed's rate cuts, investors are paying close attention to economic indicators. The newly released August new home sales were 716,000 units, down 4.7% from the previous month (751,000 units). On the following day, the final figure for the U.S. second-quarter real Gross Domestic Product (GDP) growth rate will be released. The August Personal Consumption Expenditures (PCE) price index, the inflation indicator most closely watched by the Fed, will be announced on the 27th. If the pace of economic and price deceleration eases rapidly, expectations for a big cut at the November FOMC are likely to expand further.

Wall Street expects the market to continue a volatile trend, reacting sensitively to individual indicators.

Gargi Chaudhuri, BlackRock's Chief Investment and Portfolio Strategist for the Americas, said, "The base scenario is that U.S. economic growth will gradually slow but remain positive. However, if the economy cools, it becomes more vulnerable to exogenous shocks. We are watching events that could potentially cause volatility, including the U.S. presidential election."

Lauren Goodwin, Senior Market Strategist at New York Life Investments, analyzed, "Investors will buy into this rally until unemployment claims rise, earnings slow, and growth becomes a problem. Until then, the market is expected to show real instability between growth and recession."

On the 26th, Federal Reserve Chair Jerome Powell is also scheduled to deliver a public speech. Following the big cut on the 18th and a series of statements from FOMC members this week, the market will likely seek hints about the future size and pace of rate cuts from Powell's message.

By individual stocks, Progress Software rose 11.85% after reporting earnings that exceeded expectations. KB Home fell 5.35% due to weak earnings. General Motors and Ford dropped 4.85% and 4.14%, respectively, after Morgan Stanley downgraded their investment ratings. Nvidia, which surged nearly 4% the previous day on news of large-scale production of the latest artificial intelligence (AI) chips, rose 2.18%.

Government bond yields were slightly higher. The U.S. 10-year Treasury yield, a global bond yield benchmark, rose 5 basis points (1bp = 0.01 percentage points) to 3.79%, while the 2-year Treasury yield, sensitive to monetary policy, increased 3 basis points to 3.55%.

International oil prices declined. The market began reassessing whether China's large-scale economic stimulus announcement will actually lead to economic recovery. West Texas Intermediate (WTI) crude oil fell $1.87 (2.61%) to $69.69 per barrel, and Brent crude, the global oil price benchmark, dropped $1.71 (2.27%) to $73.46 per barrel.