Tesla Soars 7.58%... Trump Beneficiary Stocks Rally
Focus on This Week's CPI, PPI Inflation Indicators
The three major indices of the U.S. New York Stock Exchange are rising in early trading on the 11th (local time). Following the resolution of uncertainty after Donald Trump was confirmed as the 47th President of the United States last week, and supported by the Federal Reserve's (Fed) interest rate cut, the Dow Jones Industrial Average surpassed the 44,000 mark intraday, and the S&P 500 index broke through 6,000 again. Bitcoin, which Trump has indicated will benefit from deregulation, surged again on the day, surpassing $84,000 for the first time in history.
As of 10:39 a.m. in the New York stock market, the blue-chip-focused Dow Jones Industrial Average is trading at 44,400.37, up 0.94% from the previous trading day. The large-cap-focused S&P 500 index is up 0.31% at 6,014.12, and the tech-heavy Nasdaq index is up 0.14% at 19,313.16.
By individual stocks, those expected to benefit from Trump's election are on the rise. Tesla, whose CEO Elon Musk declared support for Trump early on, is soaring 7.58%. Trump Media & Technology (DJT) is also up 1.92%. Cryptocurrencies, which Trump has promised to deregulate, are also rising. Bitcoin briefly surpassed the $84,000 mark during the day. According to Coinbase, as of 10:41 a.m. Eastern Time, Bitcoin is trading at $83,947, up 5.28% from the previous trading day. After surpassing $80,000 for the first time yesterday, it has consecutively broken its all-time high within a day.
Trump's announcement of pro-business policies such as corporate tax cuts and deregulation is stimulating investor sentiment with expectations that companies will receive significant benefits. Especially, with the Republican Party, to which Trump belongs, likely to control both the Senate and the House of Representatives following the November 5 elections, the possibility of a 'Red Wave' has increased, boosting expectations that Trump's pledges will be realized.
The Fed's interest rate cut is also acting as a driving force behind the stock market's rise. At the Federal Open Market Committee (FOMC) meeting held on November 7, the Fed lowered the benchmark interest rate by 0.25 percentage points from 4.75-5.0% to 4.5-4.75%. This is the second rate cut since the 'big cut' (0.5 percentage points) in September this year, which marked the start of a monetary easing cycle after a rate hike in March 2022, two and a half years ago.
Investors' attention is focused on inflation data to be released this week. On the 13th, the October Consumer Price Index (CPI) will be announced, followed by the October Producer Price Index (PPI) on the 14th. Attention is on whether the inflation data will support the disinflation trend (decline in inflation rate). Last month, the CPI rose 2.4% year-on-year, maintaining the same level as in September, while the PPI is expected to have increased by 0.2% month-on-month, expanding from September's 0%.
Chris Larkin, Managing Director of Investments at Morgan Stanley eTrade, said, "The key question is whether the bull market driven by the election and additional rate cuts can lead the market to new highs," adding, "The possibility of profit-taking due to the strong rally in the stock market and this week's inflation data will determine whether the market continues to rise."
Government bond yields are rising, mainly for the 10-year bonds. The U.S. 10-year Treasury yield, a global bond yield benchmark, is currently trading around 4.36%, up 5 basis points (1 bp = 0.01 percentage points) from the previous trading day. The 2-year Treasury yield, sensitive to monetary policy, remains at 4.25%, the same level as the previous trading day.
The dollar is strong. The Dollar Index, which measures the value of the dollar against six major currencies, is up 0.6% from the previous trading day, standing at 105.63.
International oil prices are falling, affected by disappointment over China's economic stimulus measures. West Texas Intermediate (WTI) crude oil is down $2.09 (2.97%) from the previous trading day, trading at $68.29 per barrel, while Brent crude, the global oil price benchmark, is down $2 (2.71%) at $71.87 per barrel.
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