New York Stock Market Opens Lower On Strong Producer Prices
The New York stock market opened in a downward trend on the news that the Producer Price Index (PPI) in January was stronger than expected. As of 10:19 a.m. on the New York Stock Exchange (NYSE) on the 16th (Eastern time), the Dow Jones Industrial Average is recording 38,691.64, down 81.48 points (0.21%) from the previous day. The Standard & Poor’s (S&P) 500 index showed 5,015.49, down 14.24 points (0.28%) from the previous day, and the Nasdaq index showed 15,815.47, down 90.70 points (0.57%) from the previous day.
Investors paid close attention to January’s PPI and remarks by Federal Reserve System (Fed) officials. According to the Ministry of Labor, the Producer Price Index (PPI) in January rose 0.3% compared to the previous month on a seasonally adjusted basis. This exceeds the 0.1% rise predicted by experts compiled by the Wall Street Journal (WSJ) and is the highest in five months. Last December, the PPI was revised again to show a 0.1% decline compared to the previous month. January’s core PPI, excluding food, energy, and trade, rose 0.6% from the previous month, reaching the highest level in a year since January of last year.
As producer prices quickly rebounded, government bond interest rates rose, and the value of the dollar rose. The 10-year government bond interest rate rose by about 6bp from the previous day to exceed 4.3%. The hawkish remarks of Federal Reserve officials are also pouring cold water on the market. Atlanta Federal Reserve Bank President Rapid Bostic argued in a lecture at New York University the previous day that there was no need to rush to cut interest rates because the U.S. economy and labor market are still strong. He said it was not yet clear whether the country was on a sustainable path to its 2% inflation target and that inflation would continue to slow, but slower than market expectations.
He added that in the economic outlook last December, two interest rate cuts were expected this year. With consumer prices in January and producer prices showing stronger than expected, the market is expecting the Federal Reserve’s first interest rate cut to occur in June. The likelihood that the Federal Reserve will cut interest rates in May is in the 30% range, and the likelihood that it will cut interest rates in June is in the 70% range. Companies are continuing to announce their performance. Coinbase is rising more than 10% on the news that it has succeeded in turning a net profit for the first time in two years.
The stock price of applied materials, a semiconductor equipment company, is rising more than 5% as its performance exceeds expectations. DoorDash is falling more than 12% despite news that its quarterly loss was smaller than expected. In the S&P 500 index, stocks related to telecommunications, real estate, and consumer discretionary goods are falling, while stocks related to materials, health, and consumer staples are rising. European stock markets are rising all at once. Germany’s DAX index is rising 0.25% compared to the previous day, and Britain’s FTSE index is rising 1.49%.
The French CAC index is rising by about 0.38%, and the pan-European STOXX600 index is rising by about 0.52%. International oil prices are also rising at the same time. The price of West Texas Intermediate (WTI) for March contract rose 0.49% from the previous day to $78.41 per barrel, and the price of Brent crude oil for April contract rose 0.12% from the previous day to $82.96 per barrel.
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