[New York Stock Market] Broad Decline Despite Trump Bell Ringing... Wholesale Prices Rebound and Big Tech Profit-Taking

November PPI Up 0.4% MoM... Exceeds Expectations
Nasdaq Rally Falters Amid Tech Stock Profit-Taking
'Exchange Closing Bell' Trump Says "Economy Will Strengthen"

The three major indices of the U.S. New York stock market all closed lower on the 12th (local time). The Nasdaq index, which surpassed the 20,000 mark for the first time in history just a day earlier, saw Donald Trump, the U.S. president-elect, ring the opening bell at the New York Stock Exchange to commemorate his selection as Time magazine's 'Person of the Year,' but there was no further rally. The sharp rise in tech stocks that had driven the Nasdaq's increase the previous day was pulled back by profit-taking, dragging the index down. Inflation data and unemployment claims that exceeded expectations in the morning also worsened investor sentiment.

On this day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average closed at 43,914.12, down 234.44 points (0.53%) from the previous trading day. The large-cap-focused S&P 500 index fell 32.94 points (0.54%) to 6,051.25, and the tech-heavy Nasdaq index dropped 132.05 points (0.66%) to 19,902.84.

The previous day, the Nasdaq index rose 1.77% to close at 20,034.89, surpassing the 20,000 mark for the first time ever. This was due to the ongoing rally in tech stocks driven by the artificial intelligence (AI) boom this year, combined with the November Consumer Price Index (CPI) increase released the day before, which did not spike significantly, fueling expectations of a rate cut this month. However, the big tech stocks that had risen the day before turned bearish on this day.

By individual stocks, AI leader Nvidia fell 1.41%. Alphabet, Google's parent company, dropped 1.57%. Tesla, which hit an all-time high the previous day, declined 1.57%. Software company Adobe plunged 13.69% after disappointing earnings forecasts for next year.

Wholesale price increases that exceeded expectations cooled investor sentiment. The U.S. Department of Labor announced that the Producer Price Index (PPI) for November rose 0.4% month-over-month and 3% year-over-year. This exceeded both October's figures (0.3% month-over-month, 2.6% year-over-year) and expert forecasts (0.2% month-over-month, 2.6% year-over-year). The PPI, a wholesale price index, influences the CPI with a time lag and can be considered a leading indicator of retail prices. The increase in the November PPI compared to the previous month and year suggests that price pressures are not easing easily. The November CPI released a day earlier rose 0.3% month-over-month and 2.7% year-over-year. Although these were 0.1 percentage points higher than October's increases (2.6% year-over-year, 0.2% month-over-month), they were all in line with market expectations.

Keith Buchanan, Chief Portfolio Manager at Globalt Investments, said, "The trajectory of disinflation (slowing inflation rate) is promising yet simultaneously concerning," adding, "It continues to fall below 3%, but progress toward the Federal Reserve's (Fed) target of 2% is slow."

However, there are also analyses suggesting that the higher-than-expected PPI data need not be overly concerning and that a 'Santa Rally' could unfold by the end of the year.

Mark Newton, a technical analyst at Fundstrat, said, "It is well known that the PPI does not have a significant impact on the Fed's preferred inflation gauge, the core Personal Consumption Expenditures (PCE) price index," and predicted that the New York stock market could set new record highs by the end of the year.

Weekly U.S. unemployment claims also exceeded market expectations. According to the U.S. Department of Labor, new unemployment claims for the week of December 1?7 rose by 17,000 from the revised previous week to 242,000, marking the highest level in two months. The expert forecast (221,000) was also exceeded by 21,000 claims.

The market is currently pricing in a 0.25 percentage point rate cut by the Fed this month as a given. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market on this day reflected a 94.7% probability that the Fed will cut rates by 0.25 percentage points at the Federal Open Market Committee (FOMC) meeting on December 17?18. The probability of holding rates steady was 5.3%. However, the likelihood of a 0.25 percentage point cut this month followed by a hold in January next year was priced at 73.7%.

On this day, President-elect Trump visited the New York Stock Exchange and rang the opening bell, stating, "The U.S. economy will become very strong." In his speech before the bell-ringing ceremony, he reaffirmed his economic policy pledges from his candidacy, including corporate tax cuts, increased oil production, and easing inflationary pressures.

Government bond yields rose. The 10-year U.S. Treasury yield, a global benchmark for bond yields, increased by 6 basis points (1 bp = 0.01 percentage points) from the previous trading day to 4.34%, while the 2-year U.S. Treasury yield, sensitive to monetary policy, rose 4 basis points to around 4.19%.