The New York stock market was mixed on the first trading day of December despite news that the Federal Reserve System’s (Fed) preferred inflation index had slowed.
In the New York Stock Exchange (NYSE) on the 1st (US Eastern time), the Dow Jones Industrial Average 30 closed at 34,395.01, down 194.76 points (0.56%) from the battlefield.
The Standard & Poor’s (S&P) 500 index closed at 4,076.57, 3.54 points (0.09%) behind the frontrunner, and the Nasdaq index rose 14.45 points (0.13%) to 11,482.45.
Investors digested the inflation index preferred by the Federal Reserve System (Fed), Fed Chairman Jerome Powell’s comments the day before, and comments from Fed officials.
The October core personal consumption expenditure (PCE) price index, the Fed’s preferred inflation indicator, rose 5.0 percent from the same period last year.
This is in line with market expectations and is 0.2 percentage points below the previous record of 5.2%.
The rate of increase compared to the previous month was also 0.2%, lower than the 0.3% expected by the market and 0.5% recorded in the previous month.
The October PCE price index, which includes energy and food prices, rose 6.0% on the same period last year, slowing from a rise of 6.3% the previous month, and rose 0.3% month on month, showing the same level for three consecutive months.
As the consumer price index (CPI), published earlier, showed a slowdown in October, all of the inflation indicators showed a slowing trend, reducing concerns about intense Fed tightening.
Yields on 2-year and 10-year Treasury bonds also fell.
The 2-year yield broke below 4.30%, the lowest since early October, and the 10-year yield reached 3.51%, the lowest since last September.
The decline in interest rates stems from the growing possibility that the Fed will reduce its base rate hike to 0.50 percentage points at the regular Federal Open Market Committee (FOMC) meeting in December as inflation slows.
Fed Chairman Jerome Powell also mentioned in a speech the previous day that the range of interest rate increases could be lowered at the December meeting at the earliest.
The stock market rose sharply the day before according to Chairman Powell’s comments.
On this day, the mayor considered Chairman Powell’s comments and moved within a narrow range.
Fed director Michelle Bowman also said it would be appropriate to slow the rate hike on the same day.
He also noted that there is still more work to be done to adequately limit rates.
John Williams, president of the Federal Reserve Bank of New York (Fed), said in an interview that day that there are signs that inflation is heading in the right direction, and that inflation is expected to drop significantly next year.
“There’s still a way to go,” he said, arguing that the federal funds rate should be raised high enough above the inflation rate to put downward pressure on inflation.
Although inflation has slowed and Fed officials have said they will slow the pace of interest rate hikes, news that US manufacturing data contracted for the first time since May 2020 and news that job cuts were significant raised concerns about the economy and was raised
The US manufacturing index, compiled by the Institute for Supply Management (ISM), recorded 49.0 in November, falling below 50 for the first time since May 2020, indicating an economic contraction.
The final PMI for November, compiled by S&P Global, also recorded 47.7, turning into contraction for the first time since June 2020.
In November, US companies planned to cut 76,835 jobs, up 127% from the previous month.
The number of job cuts in November increased by 417% compared to the same month last year.
However, the number of weekly claims for unemployment insurance in the United States has decreased.
According to the Labor Department, the number of new unemployment insurance claims for the week ended March 26 was 225,000, down 16,000 from the previous week on a seasonally adjusted basis.
Within the S&P 500 index, stocks related to finance, consumer staples, energy, real estate, and utilities fell, while stocks related to telecommunications and health rose.
Among individual stocks, Salesforce shares fell more than 8% on news that co-CEO Brett Taylor was stepping down.
Tesla’s share price closed at the same level as the previous day despite the news of the recall in China.
Snowflake shares jumped more than 7% on news that quarterly sales beat expectations.
Shares of discount retailer Dollar General fell more than 7% as it lowered its full-year guidance citing higher costs.
Shares in American supermarket chain Kroger fell more than 1% despite better-than-expected earnings news, while shares of discount retailer Five Below rose more than 16% on the better-than-expected earnings news .
New York stock market experts warned that the market reaction could be excessive, although Chairman Powell’s speed control theory the previous day would support stock prices in the short term.
Chris Shenich, chief investment strategist at Wolf Research, told CNBC that Chairman Powell’s comment about adjusting the pace of rate hikes is expected to have a positive impact on the market in the near term.
“In the absence of clear signs that the market has misinterpreted Powell or that inflation is higher than expected, stock prices are likely to rise further in the near term,” he said.
Chris Turner, ING’s head of global markets, told the Wall Street Journal that inflation could last longer than investors expect.
“I think the market overreacted a bit (to Powell’s comments),” he said.
According to the Chicago Mercantile Exchange (CME) FedWatch, in the federal funds interest rate (FF) futures market, the probability that the Fed will raise the benchmark rate by 0.5 percentage points in December is 81.8% at the end, and the probability of a 0.75 percentage point rate increase is 18.2%.
The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) recorded 19.84, down 0.74 points (3.60%) from the battlefield.