Possibility of Federal Government Shutdown Weighs on Investor Sentiment
Market Eyes August PCE Price Index Release on the 26th
Boeing Rises 2.6% on News of Contract with Uzbekistan Airways
The three major indices on the New York Stock Exchange showed mixed movements in early trading on the 23rd (local time). After closing at record highs the previous day, buoyed by news of Nvidia's investment in OpenAI, the market appeared to be taking a breather today.
As of 10:37 a.m. on the New York Stock Exchange, the blue-chip Dow Jones Industrial Average was up 173.72 points (0.37%) at 46,555.26. The large-cap S&P 500 Index was down 5.28 points (0.08%) at 6,688.47, while the tech-heavy Nasdaq Composite was down 68.086 points (0.3%) at 22,720.89.
By stock, Boeing rose 2.63%. Buying was spurred after U.S. President Donald Trump announced that Uzbekistan Airways had signed a contract to purchase Boeing aircraft worth more than 8 billion dollars. Nvidia fell 1.94%, while Tesla slipped 0.16%.
The previous day, the market rallied across the board on optimism about artificial intelligence (AI). Nvidia announced a plan to invest 100 billion dollars in OpenAI to build large-scale AI infrastructure, such as data centers, which boosted its stock price. Nvidia is also expected to acquire a stake in OpenAI through this investment. In addition, stronger-than-expected demand for Apple's newly released iPhone 17 also supported the rally in tech stocks.
However, some are questioning the sustainability of the AI rally. Joe Davis, Chief Global Economist at Vanguard, said, "The explosive growth and adoption of AI, along with the Federal Reserve's recent rate cuts, are the two main factors that have driven higher valuations in the stock market," adding, "With valuations somewhat elevated as they are now, the market could become more vulnerable to bad news. Accelerated growth in the second half of the year or progress on stubborn inflation would be necessary to support the market."
The possibility of a federal government shutdown is also weighing on investor sentiment. On the 19th, the U.S. Senate rejected a temporary budget bill that had passed the House of Representatives. If the budget bill is not passed by the 30th, a federal government shutdown will be inevitable starting October 1.
The market is focused on economic indicators to be released this week. The core figure is the Personal Consumption Expenditures (PCE) price index for August, which will be released on the 26th. The core PCE price index, the inflation gauge most closely watched by the Federal Reserve, is expected to have risen 0.2% month-on-month last month, lower than July's 0.3%. Previously, the Federal Reserve, concerned about a slowdown in the labor market, cut the benchmark interest rate by 0.25 percentage points to a range of 4.0-4.25% on the 17th. Future inflation and employment data are expected to have a significant impact on the rate path.
Meanwhile, Federal Reserve Governor Steven Myron, known as "Trump's economic advisor," sparked controversy by arguing that the benchmark interest rate should be cut by 2 percentage points. In a speech at the New York Economic Club, he said, "The bottom line is that monetary policy has entered a restrictive zone," adding, "Leaving short-term rates about 2 percentage points tighter than appropriate poses unnecessary risks of layoffs and rising unemployment."
U.S. Treasury yields remained firm. The yield on the 10-year U.S. Treasury note, the global benchmark for bond yields, stood at 4.14%, while the yield on the 2-year Treasury note, which is sensitive to monetary policy, was at 3.6%, both hovering around the previous day's levels.
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