[New York Stock Market] "Has it risen too much?" Broad decline amid fatigue over Trump rally... Tesla down 6.1%

Short-term surge fatigue after presidential election... Profit-taking sales emerge
Trump beneficiary stocks fall... DJT & small-mid caps ↓
Mester: "Number of rate cuts next year will be fewer than expected"
CPI on 13th, PPI on 14th scheduled for release

In the U.S. New York stock market, the three major indices all closed lower on the 12th (local time). After Donald Trump was confirmed as the 47th President of the United States, the stock market had been hitting record highs daily due to the 'Trump rally,' but it is now taking a breather amid fatigue from the recent rapid rise. U.S. Treasury yields also surged, weighing on investor sentiment. Investors are awaiting the inflation data to be released the following day.

On this day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average fell 382.15 points (0.86%) from the previous trading day to close at 43,910.98. The large-cap-focused S&P 500 index dropped 17.36 points (0.29%) to 5,983.99, and the tech-heavy Nasdaq index declined 17.36 points (0.09%) to close at 19,281.4.

By individual stocks, major Trump beneficiaries declined. Tesla, led by CEO Elon Musk who had supported Trump early on, fell 6.1%. Trump Media & Technology (DJT) plunged 8.8%. Small and mid-cap stocks, expected to benefit greatly from Trump’s tax cuts and protectionist policies, also fell. The Russell 2000 index, composed mainly of small and mid-cap stocks, closed down 1.8%. Nvidia, the leading stock in artificial intelligence (AI), rose 2.1%.

The previous day, the New York stock market had hit all-time highs across the three major indices, buoyed by the pro-business Trump effect. The Dow Jones Industrial Average surpassed 44,000 for the first time ever, and the S&P 500 exceeded 6,000. However, fatigue from the short-term surge after the election and profit-taking sales emerged, causing the market to reverse and fall within a day.

Mark Malek, Chief Investment Officer (CIO) at Seabert Financial, diagnosed, "The market may have gotten ahead of itself even before the start of Trump’s second term," adding, "What led trading today was a bit of fatigue." He further explained, "Federal government debt and fiscal deficits are always concerns, but the market is now viewing them as a problem." The market is worried that Trump’s tax cut pledges, including reductions in income and corporate taxes, will increase the U.S. fiscal deficit and federal government debt.

There are also predictions that the stock market’s upward momentum may falter. Dan Wontrobski, analyst at Janney Montgomery Scott, said, "We are watching for potential profit-taking and even possible corrections in U.S. stocks in the first quarter of the new year," adding, "The upward momentum remains strong and investor sentiment is favorable, but stocks have been overbought multiple times over various periods."

There is speculation that Trump’s second-term tariff hikes could slow the pace of interest rate cuts by the U.S. Federal Reserve (Fed). Loretta Mester, former President of the Cleveland Federal Reserve Bank, participated as a panelist at the annual UBS Europe Conference held in London, UK, stating, "The pace of rate cuts next year will be influenced by fiscal policy," and "It will not be as many as we expected in September." Earlier, the Fed had forecasted four rate cuts of 25 basis points (1bp = 0.01 percentage points) each in 2025 through the dot plot released after the September Federal Open Market Committee (FOMC) meeting, but there is now speculation that the number of cuts next year will be fewer. Mester’s remarks came amid growing concerns that Trump’s promised tariff hikes could fuel inflation.

The market is also focusing on inflation data to be released this week. On the 13th, the October Consumer Price Index (CPI) will be published, followed by the October Producer Price Index (PPI) on the 14th. The key question is whether the inflation data will support the disinflation (decline in inflation rate) trend. Last month’s CPI is expected to have risen 2.4% year-on-year, maintaining the same level as in September, while the PPI is expected to have increased 0.2% month-on-month, expanding from September’s 0%.

U.S. Treasury yields are rising. The yield on the 10-year U.S. Treasury note, a global benchmark for bond yields, is currently at 4.43%, up 9 basis points from the previous trading day. The 2-year Treasury yield, sensitive to monetary policy, is at 4.34%, up 8 basis points from the previous day.

The dollar is also on the rise. The Dollar Index, which measures the value of the U.S. dollar against six major currencies, is currently at 105.88, up 0.41% from the previous trading day.

International oil prices closed slightly higher. West Texas Intermediate (WTI) crude oil rose $0.08 (0.1%) to $68.12 per barrel, while Brent crude, the global oil price benchmark, increased $0.06 (0.1%) to $71.89 per barrel.