[New York Stock Exchange] Closes Slightly Lower Ahead of FOMC as Investors Take Profits

FOMC Meeting Set for September 17...
0.25 Percentage Point Rate Cut Highly Likely
Focus on Dot Plot and Powell's Remarks
August Retail Sales Up 0.6% from Previous Month, Exceeding Expectations
Besant: "US-China Trade Agreement Imminent

On September 16 (local time), all three major indexes on the New York Stock Exchange closed slightly lower. After rising the previous day on news of progress in the US-China trade agreement and expectations of a September rate cut, the market appeared to pause for breath amid profit-taking. Investors are now focused on the Federal Reserve's Federal Open Market Committee (FOMC) meeting scheduled for the following day, where a decision on the benchmark interest rate will be made.

On this day in the New York stock market, the Dow Jones Industrial Average, which is centered on blue-chip stocks, closed at 45,757.9, down 125.55 points (0.27%) from the previous trading day. The S&P 500 Index, representing large-cap stocks, fell by 8.52 points (0.13%) to 6,606.76, while the tech-heavy Nasdaq Index dropped 14.79 points (0.07%) to close at 22,333.959.

The market's main focus is the Fed's decision on the benchmark interest rate, which will be announced the following day. Due to recent weak employment data, the likelihood has increased that the Fed will cut rates for the first time since December of last year. According to the CME FedWatch tool, the federal funds futures market is pricing in a 96% chance that the Fed will lower the current benchmark rate of 4.25-4.5% by 0.25 percentage points in September.

Particular attention is being paid to the release of the dot plot, which outlines future rate projections, and to the remarks by Fed Chair Jerome Powell at the press conference. This meeting will also be attended by Lisa Cook, whom former President Donald Trump attempted to remove, and by the new board member Stephen Miran, who also serves as the White House National Economic Council Director and was an economic advisor to Trump. The previous day, the U.S. Court of Appeals for the D.C. Circuit ruled that Cook could remain in her position as a Fed board member during ongoing litigation, and the White House announced plans to appeal the decision. Another key point of interest is the discussion among FOMC members regarding the future path of interest rates.

The economic indicators released on this day were positive. According to the U.S. Department of Commerce, retail sales in August reached $732 billion, up 0.6% from the previous month, significantly exceeding the Bloomberg forecast of 0.2%. The retail sales growth rate for July was also revised upward from 0.5% to 0.6%. This demonstrates that the recovery in consumer spending, which began in June after declines in April and May, remains robust.

However, the debate over the pace of rate cuts may intensify.

David Russell, Chief Global Market Strategist at TradeStation, stated, "Even though the labor market is weakening, consumers are not yet taking a major hit," adding, "These figures will not prevent the Fed from cutting rates tomorrow, but in the long term, dovish (monetary easing) expectations may be somewhat dampened."

Ellen Zentner, Managing Director at Morgan Stanley Wealth Management, commented, "U.S. consumer sentiment appears strong," and noted, "While this is good news for the economy, it could intensify the debate over how aggressively the Fed should cut rates."

Although it did not have a direct impact on the stock market, optimism about US-China trade negotiations continued. U.S. Treasury Secretary Scott Besant said in a CNBC interview, "Each round of talks is becoming increasingly productive, and it seems that China also believes a trade agreement is possible," adding, "We will meet again soon." He stated that additional negotiations would take place before the US-China "tariff truce" ends in November, signaling that a trade agreement is imminent. He also suggested that, following the previous day's TikTok sale agreement, discussions are now moving beyond extending the tariff truce to actually reducing tariffs.

U.S. Treasury yields remained steady. The 10-year U.S. Treasury yield, the global benchmark for bond yields, held at 4.02%, the same level as the previous trading day, while the yield on the 2-year Treasury, which is sensitive to monetary policy, fell by 2 basis points (1bp=0.01 percentage points) to 3.51%.

By stock, Oracle rose 1.5% on news of the US-China TikTok sale agreement. The previous day, The Wall Street Journal reported that if China's ByteDance sells TikTok's U.S. operations, Oracle is a leading candidate to acquire them. Alphabet, the parent company of Google, which surpassed a $3 trillion market capitalization the previous day, reversed course and fell 0.18%. Tesla jumped 2.82% for a second consecutive day, boosted by CEO Elon Musk's large-scale stock purchases.