New York Stock Market Mixed in Early Trading... Focus on Ukraine War Peace Talks and FOMC Minutes

U.S. and Russia Begin Peace Talks in Saudi Arabia
FOMC Minutes to Be Released on the 19th... Clues on Rate Path
U.S. Treasury Yields Rise on Expectations of Increased European Defense Spending

The three major indices of the U.S. New York Stock Exchange showed mixed trends in early trading on the 18th (local time). Investors are focusing on the minutes of the Federal Open Market Committee (FOMC) meeting held in January by the U.S. Federal Reserve (Fed), which will be released the next day, amid expectations for an end to the Russia-Ukraine war.

As of 9:42 a.m. in the New York stock market on that day, the Dow Jones Industrial Average (Dow), which centers on blue-chip stocks, was trading at 44,445.47, down 0.23% from the previous day. The S&P 500, which focuses on large-cap stocks, was up 0.13% at 6,122.28, and the Nasdaq, which is tech-heavy, was trading 0.31% higher at 20,089.77.

News that the U.S. and Russia have begun negotiations to end the Ukraine war is acting as a catalyst stimulating investor sentiment. On this day, U.S. Secretary of State Mark Rubio and Russian Foreign Minister Sergey Lavrov started talks on a ceasefire plan in Riyadh, the capital of Saudi Arabia. Ukraine, a key party, was initially excluded. It is expected that they will discuss the ceasefire plan along with scheduling a U.S.-Russia summit. Following a phone call on the 12th between U.S. President Donald Trump and Russian President Vladimir Putin, in which they agreed to immediately start discussions on ending the Ukraine war, both sides have been preparing for high-level contacts swiftly.

Tim Graff, Chief Macroeconomic Strategist at State Street Bank and Trust Co., analyzed, "The possibility of an end to the Ukraine war is very positive," adding, "At the base of all this is defense spending. It is expected to be good not only for U.S. defense contractors but also for European defense companies."

Investors are closely watching the Fed's January FOMC minutes to be released on the 19th. The Fed began easing monetary policy in September last year, cutting interest rates three times from a peak of 5.25-5.5% to 4.25-4.5%, and then held rates steady for the first time last month. With Fed Chair Jerome Powell repeatedly stating that he will not rush rate cuts, investors are expected to gauge the future interest rate path through the FOMC minutes. Attention is also on whether Fed officials’ views on the impact of President Trump’s tariff policies on inflation have been disclosed.

Fed officials’ public remarks will continue this week. On this day, Mary Daly, President of the San Francisco Federal Reserve Bank, and Michael Barr, Fed Vice Chair for Supervision, spoke, and on the 19th, Fed Vice Chair Philip Jefferson is scheduled to give a speech. On the 20th, Austan Goolsbee, President of the Chicago Federal Reserve Bank, and Fed Director Adriana Kugler will speak.

Major economic indicators released last week were mixed. The January Consumer Price Index (CPI) rose 3% year-over-year, exceeding both the previous month and market expectations (both 2.9%). Housing costs, food, and energy prices all increased. On the other hand, January retail sales fell 0.9% month-over-month, shrinking much more than the previous month (0.7%) and the forecast (0.2% decline).

Investors expect the Fed to keep interest rates steady for the time being. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on this day reflected a 97.5% probability that the Fed will hold rates steady in March. The probability of maintaining rates in May is 83.4%, and in June, 51%.

U.S. Treasury yields are on the rise. The 10-year U.S. Treasury yield, a global bond yield benchmark, rose 4 basis points (1bp = 0.01 percentage points) from the previous trading day to 4.51%, while the 2-year Treasury yield, sensitive to monetary policy, increased 2 basis points to 4.28%. Expectations that European leaders will increase military spending have pushed bond yields higher, which in turn has driven U.S. Treasury yields upward.

By stock, Nvidia is up 1.75%. Microsoft (MS) is up 0.19%, Apple is down 0.18%, and Tesla is down 0.61%.