[New York Stock Market] September CPI Exceeds Expectations, Leading to Broad Decline... Increased Interest Rate Uncertainty

September CPI Rises 2.4% Year-on-Year
Bostic Mentions Possibility of Rate Hold
Last Week's Unemployment Claims Highest in 14 Months

The three major indices of the U.S. New York stock market closed slightly lower on the 10th (local time). Inflation exceeded expectations, intensifying debates over the future scale of interest rate cuts, leading to a cautious market stance. Within the U.S. Federal Reserve (Fed), there was also a forecast that interest rates might be held steady at the next meeting.

On that day in the New York stock market, the Dow Jones Industrial Average, centered on blue-chip stocks, closed at 42,454.12, down 57.88 points (0.14%) from the previous trading day. The S&P 500 index, focused on large-cap stocks, fell 11.99 points (0.21%) to 5,780.05, and the Nasdaq index, centered on technology stocks, ended trading down 9.57 points (0.05%) at 18,282.05.

The U.S. inflation rate announced that morning exceeded expectations, increasing uncertainty about the future interest rate path. According to the U.S. Department of Labor, the Consumer Price Index (CPI) for September rose 2.4% year-over-year. Although this was a smaller increase than August's 2.5%, it was higher than the expert forecast of 2.3%. The core CPI rose 3.3% compared to a year earlier, also surpassing the market estimate of 3.2%. Rising food and housing costs pushed the CPI higher.

Quincy Crosby, Chief Global Strategist at LPL Financial, said, "With inflation rising and the labor market cooling, the Fed is caught in a dilemma," adding, "These economic indicators are not the combination the Fed desires."

While the overall inflation trend is slowing toward the Fed's target of 2%, one Fed official mentioned the possibility of holding rates steady. Raphael Bostic, President of the Federal Reserve Bank of Atlanta, stated that "if the indicators are deemed appropriate, there is absolutely no problem skipping a rate cut meeting," suggesting the possibility of holding rates steady in November. On the other hand, Austan Goolsbee, President of the Federal Reserve Bank of Chicago, said in a CNBC interview immediately after the September CPI release, "What matters is not the day-to-day fluctuations but the overall trend," diagnosing that "looking at the overall trend over 12 to 18 months, inflation has dropped significantly, and the job market has cooled to a level we consider full employment."

Separately, the U.S. Department of Labor's unemployment claims data confirmed a gradual slowdown in employment. According to the Labor Department, new unemployment claims for the week of September 29 to October 5 increased by 33,000 from the previous week to 258,000, marking the highest level since August last year. The number exceeded expert forecasts (231,000) by 27,000 due to the impact of Hurricane Helen.

Following the inflation and employment data releases, the market sought to gauge the next interest rate cut. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market reflects an 86.3% probability that the Fed will cut rates by 0.25 percentage points at the next Federal Open Market Committee (FOMC) meeting next month. This is a 6 percentage point increase from the previous day's 80.3%. Conversely, the probability of holding rates steady fell from 19.7% the previous day to 13.7% on this day.

Anna Wong, an economist at Bloomberg Economics, said, "Despite the surprise rise in core CPI, the FOMC will not change its view that inflation is on a downward trajectory," and predicted, "The FOMC is expected to cut rates by 0.25 percentage points in November."

By individual stocks, U.S. Domino's Pizza fell 1.08% after revising its annual sales forecast this year. Pfizer, the U.S. pharmaceutical company, dropped 2.85% after activist investor Starboard Value threatened legal action against two former Pfizer executives.

Government bond yields declined. The yield on the U.S. 10-year Treasury note, a global bond yield benchmark, fell slightly to 4.06% compared to the previous day, while the yield on the U.S. 2-year Treasury note, sensitive to monetary policy, dropped 5 basis points to 3.96%.

International oil prices rose due to supply concerns following Hurricane Milton's landfall in Florida and instability in the Middle East. West Texas Intermediate (WTI) crude oil closed at $75.85 per barrel, up $2.61 (3.6%) from the previous trading day, and Brent crude, the global oil price benchmark, rose $2.82 (3.7%) to $79.40 per barrel.