New York Stock Market Holds Steady Digesting Expected CPI... 80% Forecast for December Small Cut

October CPI up 2.6% YoY as Expected
December Small Cut Outlook Rises from 58% to 82% in One Day
Government Bond Yields Fall... 2-Year Down 8bp
Tesla Rises Over 4% on Musk Joining Cabinet

The three major indices of the U.S. New York stock market are showing gains in the early session on the 13th (local time) after trading near flat. Following a broad decline the previous day due to fatigue from the 'Trump rally,' the market is taking a breather as investors digest inflation data that met market expectations. The market's expectation for a rate cut in December has risen to 80%, and Treasury yields are declining.

Yonhap News

As of 9:42 a.m. in the New York stock market, the blue-chip-focused Dow Jones Industrial Average is up 0.21% from the previous trading day, standing at 44,002.6. The large-cap-focused S&P 500 index is trading 0.09% higher at 5,989.65, and the tech-heavy Nasdaq index is up 0.09% at 19,299.3.

By individual stocks, Trump beneficiary stocks that plunged the previous day are rising. Tesla is up 4.26%. The day before, U.S. President-elect Donald Trump appointed Elon Musk, Tesla CEO who has strongly supported him throughout the election process, as head of the Department of Government Efficiency. With expectations of deregulation under the second Trump administration, bank stocks are also slightly higher. JPMorgan Chase and Bank of America (BoA) are up 0.89% and 0.74%, respectively. Bitcoin is trading at $90,881 on Coinbase as of 9:45 a.m. Eastern Time, up 5.18% from the previous trading day.

Investors focused on the October Consumer Price Index (CPI) released that morning. According to the U.S. Department of Labor, last month's CPI rose 2.6% year-over-year. This is a 0.2 percentage point increase from 2.4% in September but in line with market expectations. The core CPI, which excludes volatile energy and food prices to show the underlying inflation trend, rose 3.3% year-over-year, also matching forecasts. Increases in housing and food prices contributed to last month's CPI rise, but since it met expectations, hopes for a December rate cut have spread. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market is pricing in an 82.3% chance that the Fed will cut rates by 0.25 percentage points at the December Federal Open Market Committee (FOMC) meeting, up significantly from 58.7% the day before.

With rate cut expectations, U.S. Treasury yields are also falling. The 10-year U.S. Treasury yield, a global bond yield benchmark, is down 4 basis points (1bp=0.01%) from the previous trading day to 4.38%, while the 2-year Treasury yield, sensitive to monetary policy, is down 8 basis points to around 4.26%.

Lindsey Rossner, Head of Multi-Sector Bond Investments at Goldman Sachs Asset Management, analyzed, "Today's (CPI) figures have calmed fears that the pace of rate cuts could slow down quickly."

However, there are also views that the Fed may pause monetary easing for a while after implementing a rate cut next month. Skyler Weinand, Chief Investment Officer (CIO) at Reagan Capital, said, "Today's CPI release met market expectations but still significantly exceeds the Fed's 2% target," adding, "The Fed may pause its monetary easing path after one rate cut in December." The core CPI inflation rate remains high.

Investors are awaiting another inflation indicator, the October Producer Price Index (PPI), which will be released the next day. The wholesale price index, PPI, affects the retail price index, CPI, with a time lag. Last month's PPI is expected to have risen 0.2% month-over-month, an increase from September's 0%.

International oil prices are trading near flat. West Texas Intermediate (WTI) crude oil is up $0.18 (0.26%) from the previous trading day, at $68.30 per barrel, while Brent crude, the global oil price benchmark, is up $0.15 (0.21%) at $72.04 per barrel.