[New York Stock Market] S&P and Nasdaq Fall Amid 'Hawkish Cut' Concerns... US Treasury Yields Rise

Early Gains Reversed
10-Year Bond Yields Rise on Slower Pace of Monetary Easing
Q3 GDP Growth Exceeds Preliminary Estimate at 3.1%
November PCE Inflation Data to Be Released on 20th

The three major indices of the U.S. New York Stock Exchange closed mixed near the flat line on the 19th (local time). The market, which plunged the previous day due to the Federal Reserve's (Fed) 'hawkish (preference for monetary tightening) rate cut,' did not fully recover from the shock on this day either. U.S. Treasury yields continued to rise, weighing on investor sentiment.

On this day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average closed at 42,342.24, up 15.37 points (0.04%) from the previous trading day. This marked the end of the Dow's longest losing streak since 1974, rebounding after 10 consecutive trading days of decline. The large-cap-focused S&P 500 index fell 5.08 points (0.09%) to 5,867.08, and the tech-heavy Nasdaq index dropped 19.92 points (0.1%) to close at 19,372.77.

At the start of trading, all three major indices rose due to a wave of rebound buying, but fears that the Fed's monetary easing cycle might be coming to an end suppressed investor sentiment, ultimately erasing the gains. The previous day, the Fed cut the benchmark interest rate by 0.25 percentage points to 4.25-4.5%, but significantly reduced the expected number of rate cuts next year from four cuts of 0.25 percentage points each (total 1.0 percentage point) to two cuts (total 0.5 percentage points). Fed Chair Jerome Powell stated that the pace of rate cuts would slow as inflation rises.

Matt Maley, Chief Market Strategist at Miller Tabak, analyzed, "Investors showed a defensive stance today and did not jump into the market with both feet," adding, "If there is no relief in the bond market, there may be no Santa Claus rally this year."

Long-term Treasury yields continued to rise, acting as a negative factor for investor sentiment. The U.S. 10-year Treasury yield, a global bond yield benchmark, rose 7 basis points (1bp = 0.01 percentage points) from the previous day to 4.56%, after surpassing 4.5% for the first time in six months the day before. The 2-year Treasury yield fell 3 basis points to 4.31% compared to the previous day.

Economic indicators released that morning also supported the Fed's stance suggesting a slowdown in monetary easing by proving the U.S. economy's solid recovery. According to the U.S. Bureau of Economic Analysis (BEA), the final figure for third-quarter real Gross Domestic Product (GDP) grew at an annualized rate of 3.1% quarter-over-quarter. This exceeded the previously announced flash and preliminary estimates (both 2.8%) as well as the second-quarter growth rate (3.0%). Personal consumption expenditures increased by 3.7% quarter-over-quarter, significantly contributing to third-quarter growth.

The labor market remained robust. According to the U.S. Department of Labor, initial jobless claims for the week of December 8-14 fell by 22,000 from the revised previous week to 220,000. The expert consensus estimate of 229,000 was also missed by 9,000 claims.

Oren Klakin, an economist at Nationwide, said, "The indicators released this week show that the economy will finish 2024 in a solid state," but added, "I still think the Fed is leaning toward monetary easing, but the bar for rate cuts has been raised."

The market is focusing on the November Personal Consumption Expenditures (PCE) price index to be released on the 20th. The importance of inflation data was highlighted again after Chair Powell said the previous day, "We will consider inflation progress when reviewing additional rate cuts." According to market experts' forecasts, the November core PCE price index is expected to have risen 2.9% year-over-year, an increase from October's 2.8%.

By individual stocks, Nvidia, the leader in artificial intelligence (AI), rose 1.37%. Apple increased by 0.7%. Financial stocks showed mixed results. JPMorgan rose 1.12%, while Morgan Stanley and Bank of America (BoA) fell 0.42% and 0.28%, respectively.