The New York Stock Exchange is fluctuating after the CPI price announcement. The headline price has fallen, but the core CPI price has risen, and as analysis has emerged that Powell’s Fed will give up the big cut rate cut, the New York Stock Exchange has been shaken for a while. Some in the New York Stock Exchange Bitcoin are even raising concerns about stagflation beyond recession. Jamie Dimon, CEO of JP Morgan, has publicly warned of stagflation.
According to the New York Stock Exchange on the 12th, the U.S. Department of Labor announced that the U.S. Consumer Price Index (CPI) in August rose 2.5% year-on-year. This figure is lower than the expert forecast (2.6%) compiled by Dow Jones. Compared to the previous month, it rose 0.2%, meeting the forecast. Excluding highly volatile energy and food, the core CPI rose 3.2% year-on-year and 0.3% month-on-month, respectively. The year-on-year increase rate was in line with expert forecasts, but the month-on-month increase rate exceeded expectations (0.2%).
U.S. New York Stock Exchange Weekly Key Indicators and Speeches Schedule
September 11 = Consumer Price Index (CPI)
September 12 = Eurozone ECB key interest rate decision, US August producer price index (PPI), US new unemployment claims, New York Stock Exchange Adobe, Kroger earnings announcement
September 13 = Export and Import Price Index, University of Michigan Consumer Sentiment Index
The New York Stock Exchange, which closed on the morning of the 11th in Korean time, closed mixed. The Dow Jones Industrial Average on the New York Stock Exchange (NYSE) closed at 40,736.96, down 92.63 points (0.23%) from the previous day. The Standard & Poor’s (S&P) 500 index closed at 5,495.52, up 24.47 points (0.45%) from the previous day, and the Nasdaq Composite Index closed at 17,025.88, up 141.28 points (0.84%) from the previous day. The New York Stock Exchange closed in mixed directions on this day, but showed some volatility during the session. The S&P 500 index at one point expanded its decline to -0.54%. The Nasdaq index also fell to -0.49%. As concerns about an economic recession grew amid news of a plunge in international oil prices, the stock market also turned to a selling trend.
On the New York Mercantile Exchange, West Texas Intermediate (WTI) crude oil for October delivery, the nearest month, closed at $65.75 a barrel, down $2.96 (4.31%) from the previous trading day. This is the lowest low since December 2021. The Organization of Petroleum Exporting Countries (OPEC) stimulated selling sentiment by lowering its crude oil demand forecast for major countries again in two months. In its monthly report released that day, OPEC lowered its forecast for global oil demand growth this year from 2.11 million barrels per day to 2.03 million barrels, reflecting factors such as slowing growth in China. Afterwards, the S&P 500 and Nasdaq indexes ended higher as low-price buying flowed in, mainly in technology stocks. The Dow Jones Industrial Average also narrowed its decline and finished in a slight consolidation. Among the so-called M7 ‘Magnificent Seven’, the seven largest tech companies, Microsoft and Amazon rose more than 2%, Tesla rose 4.58%, and Nvidia rose 1.53%.
On the New York Stock Exchange, Broadcom jumped 5.25%, recovering some of its recent losses, and semiconductor and artificial intelligence (AI)-related stocks also rose, with AMD up 3.39%. Oracle surged 11.44% after reporting better-than-expected earnings and an improved earnings outlook. Banking stocks fell sharply. JPMorgan Chase plunged 5.19%, the biggest drop among the 30 Dow stocks. There was a selloff due to disappointment after JPMorgan gave a cautious outlook for next year’s net interest margin at an industry conference. Goldman Sachs also plunged 4.39% on the day after it announced that its third-quarter pretax loss would reach $400 million as it sells off its card business and loan portfolio.
Oil stocks were also hit by the plunge in international oil prices. ExxonMobil fell 3.64% and Chevron fell 1.48%. According to the Chicago Mercantile Exchange (CME) FedWatch Tool, the federal funds futures market reflected a 69% probability that the September benchmark interest rate will be cut by 25bp. The probability of a 50bp cut rose slightly from the previous day to 31%. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) recorded 19.08, down 0.37 points (1.90%) from the previous day.
Major Asian stock markets closed weak due to the fall in oil prices, the U.S. presidential debate, and the strong yen. Major Chinese indexes fell due to the slump in oil prices and other factors. The Tokyo stock market fell due to the strong yen following the Bank of Japan’s hawkish stance. Taiwanese stocks showed a weak trading trend amid a wait-and-see mentality. The Shanghai Composite Index closed at 2,721.80, down 22.40 points (0.82%), and the Shenzhen Composite Index closed at 1,499.53, down 0.72 points (0.05%). Chinese stock markets began to decline, focusing on the plunge in international oil prices. On the New York Mercantile Exchange, West Texas Intermediate (WTI) crude oil for October delivery, the nearest month, closed at $65.75 per barrel, down $2.96 (4.31%) from the previous trading day. Concerns about a global economic downturn spread as crude oil demand forecasts were revised downward. The People’s Bank of China (PBOC) announced this morning that the dollar-yuan reference rate was set at 7.1182 yuan, up 0.0046 yuan (0.06%) from the previous day. A rise in the dollar-yuan exchange rate means a fall in the value of the yuan against the dollar.
The Nikkei 225 index closed at 35,619.77, down 539.39 points (1.49%) from the previous day, and the Topix index closed at 2,530.67, down 45.87 points (1.78%). The Nikkei index fell for the seventh consecutive trading day, and the Topix index fell for the sixth consecutive trading day. With the U.S. Federal Open Market Committee (FOMC) meeting scheduled for the 17th and 18th expected to cut the benchmark interest rate, the outlook for a further narrowing of the interest rate gap between the U.S. and Japan has grown as a member of the Bank of Japan’s policy council made positive remarks on additional interest rate hikes. Junko Nakagawa, a member of the policy council, said at the Akita Prefecture Financial and Economic Forum, “Despite the interest rate hike in July, monetary policy conditions are still accommodative,” and suggested, “If the economy and prices move as expected, there is a high possibility that the level of monetary easing will be adjusted.” As a result, the dollar-yen exchange rate fell to 140.708 yen during the session, the lowest level since January 2. A strong yen is a negative factor for Japanese exporters.
The fact that former US Republican presidential candidate Donald Trump performed poorly in a TV debate with Democratic presidential candidate Vice President Kamala Harris also affected investor sentiment. As more favorable evaluations were given to Harris than to Trump, who is pro-business, overseas forces’ selling of index futures intensified. As a result, the Nikkei index plunged 2.5% at one point in the afternoon. Major stocks such as Toyota, Fast Retailing, Lasertech, Disco, Tokyo Electron, Advantest, and Mitsubishi Heavy Industries fell one after another.
TSMC rebounded just before the market closed, up 0.11%. TSMC reported via Bloomberg the previous day that its August sales increased 33% year-on-year. Although it decreased by 2.4% from July, when it recorded its highest sales, it is still considered to be continuing high growth. Wall Street is forecasting that TSMC’s third-quarter sales will increase by 37%. Foxconn rose 0.3%, successfully rebounding for the first time in three trading days. This is because the market’s response to Apple’s iPhone 16 was cold the previous day, but Wall Street’s positive evaluation came out. Morgan Stanley recommended buying Apple stock while maintaining an ‘overweight’ rating for Apple’s new product.
The KOSPI closed at 2,513.37, down 10.06 points (0.40%) from the previous trading day, and the won/dollar exchange rate closed at 1,339.0 won, down 4.7 won. Samsung Electronics[005930]ended trading at 64,900 won, down 1.96% amid concerns over poor third-quarter performance. During the session, it recorded a 52-week low of 64,200 won. SK Hynix[000660](1.09%) rose. Hyundai Motors[005380](-3.25%), hunger[000270](-3.99%) showed weakness as exports of electric vehicles decreased year-on-year from January to July, and KB Financial Group[105560](-6.03%), Shinhan Financial Group[055550](-6.18%), Hana Financial Group[086790](-6.50%), Meritz Financial Group[138040](-1.12%) and other financial stocks plunged along with the analysis that there are concerns about the performance of the banking industry after the interest rate cut. LG Energy Solution[373220](5.14%), POSCO Holdings[005490](3.32%), Samsung SDI[006400](9.91%), POSCO Future M[003670](8.93%), LG Chemical[051910](2.94%) and other secondary battery stocks rose sharply across the board.
Ecoprobiem[247540](3.36%), EcoPro (2.75%), Enchem[348370](3.63%) HLB is rising amid rising secondary battery stocks[028300](1.40%), Alteogen[196170](0.33%), Rainbow Robotics[277810](2.20%), Pearl Abyss[263750](3.55) also showed strength.
Silicon Tu[257720](-4.00%), Estifam[237690](-2.71%), Ligachembio[141080](-2.78%), Celltrion Pharmaceuticals[068760](-2.10%), Hugel[145020](-1.59%) was weak. Bitcoin, which is considered an asset that benefited former President Donald Trump after the US presidential candidate television debate, is showing weakness. The Bitcoin price, which was hovering around $57,500 before the debate began, fell sharply as the debate progressed. Vice President Kamala Harris, the Democratic presidential candidate, and former President Trump, the Republican candidate, held their first presidential candidate debate hosted by ABC on this day, and the Bitcoin price decline is evaluated to reflect the market reaction that Vice President Harris was ahead.
Former President Trump has been showing a cryptocurrency-friendly stance, such as declaring that he will make the United States the cryptocurrency capital. Not only has a non-fungible token (NFT) modeled after former President Trump been launched, but there are also concerns about a conflict of interest as his family is promoting a cryptocurrency business. The dollar index, which measures the value of the dollar against six major currencies including the euro and yen, is at 101.392, down 0.238 from the previous day, and the won/dollar exchange rate in the Seoul foreign exchange market closed at 1,339.0 won, down 4.7 won from the previous day’s weekly closing price (as of 3:30 p.m.). The yen/dollar exchange rate hit 140.71 yen at one point during the session, the lowest in eight months since December 28 last year when it was 140.25 yen. The yen/dollar exchange rate has since narrowed some of its decline and is currently trading at 141.29 yen, down 1.15 yen from the previous day.
Following former President Trump’s criticism of the weak yen, the yen has been strengthening recently, but some say that the yen/dollar movement on this day was more influenced by remarks by Bank of Japan officials suggesting additional interest rate hikes. At an event that day, Junko Nakagawa, a member of the Bank of Japan’s board of directors, said, “We will adjust the level of monetary easing” assuming that prices rise steadily.
The US Federal Reserve will hold a meeting of the FOMC, the Fed’s top decision-making body, on September 17 and 18. At this meeting, the US will decide whether to lower its benchmark interest rate. On March 16, 2000, when the coronavirus began to spread, the US lowered its benchmark interest rate by 1%. It was the so-called mammoth cut. That was the last time the US Federal Reserve FOMC lowered its benchmark interest rate. Since then, it has continued to raise interest rates.
The US Federal Reserve has continued to raise the base interest rate under the pretext of controlling inflation as the money released during the coronavirus pandemic threatens prices. As a result, the current US base interest rate is a whopping 5.5%. It is 5% higher than the base interest rate of 0.25% on March 16, 2000. The rate has skyrocketed by a whopping 10 times. It seems that the US base interest rate, which has been continuously rising, will finally begin to fall starting this Chuseok.
For many economic entities that have been suffering from high interest rates, this is truly welcome news. Not only the New York Stock Exchange, but also all financial products, including KOSPI, KOSDAQ, dollar exchange rate, government bond interest rate, international oil price, gold price, and virtual cryptocurrencies such as Bitcoin, Ethereum, and Ripple, are looking forward to Jerome Powell’s interest rate cut gift that will be released during the Chuseok season. The decision of the Federal Reserve FOMC this time will be announced at 3:00 AM on September 19th, Korean time. The Chuseok gift from Powell from the FOMC is expected to be revealed on the last night after the Chuseok holiday.
The reason why economic experts around the world are considering the Fed FOMC’s rate cut on the morning of September 19 as a done deal is because the current US economic situation is getting to a point where it is difficult to endure higher interest rates. The sector that is most affected by the interest rate hike is employment. Unable to afford the higher interest rates, companies are successively reducing hiring and restructuring, causing the unemployment rate to rise to 4.3%. The number of new jobs has decreased from the usual monthly average of 300,000 to 400,000 to the early 100,000s.
. The fundamental reason why the US Federal Reserve has raised the base interest rate 11 times in a row since March 17, 2022 was to fight inflation. The money released during the coronavirus pandemic has stimulated prices due to excess liquidity, so they have continued to raise interest rates, saying that they are controlling inflation. If interest rates are raised, households and companies will have difficulty bearing the burden, so they will restrain lending. As a result, prices may be controlled. The US consumer price index, or CPI, has fallen to 2.6% per annum due to the effect of the base interest rate hike. It has fallen significantly compared to the CPI price, which once rose to 9.5%. However, it is still higher than the Fed’s target of 2%. Considering only the inflation aspect, the Fed should raise interest rates further in the future or at least freeze the current interest rate. The problem is employment. In the process of raising interest rates to control prices, employment indicators have deteriorated significantly. If this is left as is, an economic recession or deflation may occur.
Economics is often called “the art of catching two rabbits at the same time.” The two rabbits in economics are prices and growth. Rabbits instinctively run in different directions when someone tries to catch them. It is a survival strategy of the earthenware. The average hunter gives up one of the two and focuses on the other. If you try to catch both rabbits that are running in different directions, you may miss both.
In the world of economics, you cannot give up either of the two rabbits. Both prices and growth are important in economics. If you miss even one of the two rabbits, prices and growth, the economy will collapse. Prices and growth are like two rabbits running in different directions, and they are in a mutually conflicting relationship. If you control prices, growth will collapse, and if you focus on growth, prices will fluctuate, so it is not easy to control growth and prices at the same time. Nevertheless, it is the fate of economics to control growth and prices at the same time. It is no exaggeration to say that the success of economic policy depends on controlling growth and prices at the same time. The attention of the New York stock market is focused on the extent of the Fed’s FOMC’s interest rate cut. There is a debate over whether Jerome Powell’s Chuseok interest rate cut will be a basic cut of 0.25% or a big cut of 0.5%. The speed at which interest rate cuts will continue after September is also a variable. The answer lies in Phillips. If we look at which of the two axes of the Phillips curve, employment or prices, is further from market equilibrium, we can foretell Jerome Powell’s choice.
Kim Dae-ho, Director of Global Economic Research Institute tiger8280@g-enews.com
What is the significance of the CPI report’s 2.5% year-on-year increase for predicting future trends in the New York Stock Exchange?
New York Stock Exchange Volatility: CPI Report Sparks Concerns of Stagflation and Rate Cuts
The New York Stock Exchange has been shaken after the release of the Consumer Price Index (CPI) report, which showed a 2.5% year-on-year increase in August, lower than the expert forecast of 2.6% [[3]]. The core CPI, excluding highly volatile energy and food, rose 3.2% year-on-year and 0.3% month-on-month, exceeding expectations. The mixed results have sparked concerns of stagflation, a rare economic phenomenon characterized by stagnant economic growth and high inflation.
The Federal Reserve, led by Chairman Jerome Powell, is expected to make a decision on interest rates at its upcoming meeting on September 17-18. Market analysts and investors are divided on whether the Fed will cut interest rates by 25 basis points or 50 basis points, with
