New York Stock Market: Stocks Rise While Bond Yields Fall

September Rate Cut Expectations Rise on May CPI Slowdown

On the 11th (U.S. Eastern time), the New York stock market saw stock prices climb and bond yields decline after inflation data for May came in softer than expected.

As of 10:15 a.m. Eastern Standard Time, the S&P 500 was up 0.2% and the Nasdaq Composite had risen 0.3%. The Dow Jones Industrial Average was also up 0.2%.

The lower-than-expected inflation pushed arguments for a Federal Reserve rate cut, sending Treasury yields lower. The policy-sensitive 2-year U.S. Treasury yield fell by 4 basis points (1bp=0.01%) to 3.999%. The 10-year yield dropped 3bp to 4.44%.

In the rate swap market, investors expect the Federal Reserve to cut rates twice by the end of 2025. According to the CME FedWatch Tool, up until the day before, the first Fed rate cut was most likely expected in October, but after the CPI release, the odds for a September rate cut jumped to 57%.

The May Consumer Price Index (CPI) rose only 0.1% from April, below economists’ forecasts of 0.2%. Core CPI, which excludes the volatile food and energy components, also rose just 0.1%, undershooting expectations.

Alexandra Wilson-Elizondo, Global Co-CIO of Multi-Asset Solutions at Goldman Sachs Asset Management, said, "May's inflation rate coming in lower than expected suggests that companies are either relying on existing inventories or delaying price adjustments due to unclear demand." She added, "While waiting for the 90-day tariff moratorium to end, the market will be caught between inflation and labor market indicators." She further noted that if inflation remains under control or the job market deteriorates, the Fed is likely to consider rate cuts.

After two days of talks, the United States and China reached a deal enabling China to approve rare earth mineral exports, while the U.S. agreed to lift restrictions on advanced technology sales to China.

President Trump posted on Truth Social on Wednesday, stating, "A deal with China has been completed and requires final approval from President Xi Jinping and myself." He also stated, "We will receive a total tariff rate of 55%, and China will receive 10%."

He added that China will supply magnets and "all necessary rare earths" in advance, and the U.S. will allow Chinese students to enroll in American universities.

Meanwhile, Tesla rebounded, climbing 1.2%, extending gains from the previous day. NVIDIA shares experienced volatility during the session.

After IBM’s announcement the day before regarding its plan for a 'fault-tolerant quantum computer,' NVIDIA CEO Jensen Huang noted at the GTC Conference in Europe that "quantum computing has reached an inflection point," sending quantum computing-related stocks higher. Jensen Huang projected that Europe's AI computing capacity will grow tenfold over the next two years, with more than 20 AI factories to be built.

Bitcoin was down 0.2% at $109,777.62, while Ether gained 1.4% to reach $2,813.44. Spot gold prices climbed 0.3% to $3,335.23 per ounce.

Jung-A Kim, Contributing Reporter, kja@hankyung.com