The US stocks market traded with limited movement on Thursday (11/1) following reports of increased inflation in the world’s largest economy the previous month. Crude oil prices saw a nearly 1% uptick after Iran reportedly seized an oil tanker, stirring concerns about heightened tensions in the critical oil-rich Middle East.
After experiencing fluctuations throughout the trading session, all three indices closed with mixed outcomes. The Nasdaq concluded at 14,970.19 points from the preceding session. The Dow Jones index saw a modest gain of 15.29 points, translating to a 0.04% increase, reaching 37,711.02 points. Meanwhile, the S&P 500 index edged down by 0.07% to 4,796.56 points.
The much-anticipated report from the US Department of Labor revealed that the Consumer Price Index (CPI) for December surpassed expectations, showing a 0.3% month-on-month increase and a 3.4% year-on-year rise. In an earlier Dow Jones survey, economists had forecasted a 0.2% monthly increase in CPI and a 3.2% annual increase. Notably, the November index reflected a 0.2% monthly decrease and a 3.1% yearly increase compared to the same period in 2022.
The core Consumer Price Index (CPI), excluding the volatile food and energy categories, experienced a moderate increase consistent with predictions: a 0.3% rise compared to the previous month and a 3.9% increase from the same period last year. This year-on-year uptick marks the lowest since May 2021, indicating that while inflation continues its downward trend, the reduction is gradual and persistent.
Following the report release, expectations in the market regarding potential interest rate cuts by the Federal Reserve from March declined.
“The uptick in CPI serves as a significant reminder of the unpredictable nature of economic recovery and the mixed characteristics of macroeconomic data. The market needs to brace itself for potential volatility, and the Fed may maintain or even strengthen its tightening monetary policy stance to address this inflationary pressure,” noted Jon Maier, Chief Investment Officer at Global X, in an interview with CNBC.
Following a vibrant end to 2023, the US stocks market is struggling to gain new momentum as it enters 2024. The S&P 500 has seen only a modest 0.21% year-to-date increase, with a mix of economic indicators and cautious remarks from Federal Reserve officials leading investors to temper their expectations regarding the timing and frequency of potential Fed interest rate cuts this year.
On Thursday, both Loretta Mester, the President of the Cleveland Fed, and Tom Barkin, the President of the Richmond Fed, expressed that the December CPI data didn’t instill greater confidence in the secure decline of inflation towards the Fed’s 2% target. They stressed the necessity for additional information before the Fed contemplates any decisions on interest rate cuts.
The easing of yields on US Treasury bonds provided some relief for stocks towards the end of the trading session. The 10-year yield reached close to 4.07% following the release of the CPI report but concluded the session at 3.98%. Yields declined as a result of a Treasury auction for 30-year bonds, attracting ample demand to absorb the entire offering.
“Investors are still concerned about the supply in the US Treasury bond market. Whether the issuance can be fully absorbed, especially for long-term bonds. But in today’s auction, everything went perfectly,” noted Scott Ladner, Chief Investment Officer at Horizon Investments.
In this trading session, there was a point where Microsoft briefly outpaced Apple to become the world’s most valuable publicly listed company, as Apple’s stocks declined nearly 4% year-to-date due to concerns about a drop in iPhone demand.
Among the 11 primary sectors of the S&P 500, 9 sectors experienced declines in this session, with only the energy and technology sectors finishing in positive territory.
In the energy market, WTI crude oil prices in New York increased by $0.65 per barrel, marking a 0.91% rise and closing at $72.02 per barrel. Similarly, Brent crude oil prices in London saw a $0.61 per barrel increase, equivalent to a 0.79% rise, ending the session at $77.41 per barrel.
At one point during the session, both types of oil surged by over $2 per barrel on news of Iran seizing an oil tanker transporting Iraqi oil to Turkey, in response to the US capturing the same vessel last year while it was carrying Iranian oil. The incident involving the St. Nikolas, flying the Marshall Islands flag, occurred simultaneously with Iran-backed Houthi rebels persisting in attacks on ships passing through the Red Sea.
Towards the session’s conclusion, oil prices narrowed their gains as investors tempered expectations of an early Fed interest rate cut, coupled with reports indicating that China is reducing its purchases of oil from Saudi Arabia.
By. Pham Thanh Bien
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