[New York Stock Market Briefing] Rises for the Second Day on Interest Rate Cut Expectations... S&P500 and NASDAQ Set New Highs Again

The three major indices of the New York stock market closed higher for the second consecutive day. As expectations grew for the Fed to cut rates in September, there was strong buying inflow into traditional stocks and small- and mid-cap stocks.

On the 13th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 44,922.27, up 463.66 points (1.04%) from the previous session. The S&P 500 index rose 20.82 points (0.32%) to 6,466.58, and the tech-focused NASDAQ Composite added 31.24 points (0.14%) to end at 21,713.14. The S&P 500 and NASDAQ marked record highs for a second straight day.

There were no clear economic indicators or events driving the market today. With the market awaiting the U.S. July Producer Price Index (PPI) announcement on the 14th, there appears to be continued risk-on sentiment triggered by the July Consumer Price Index (CPI) results. After the July CPI release, growing expectations for a September rate cut have created a buying bias.

According to the Chicago Mercantile Exchange (CME) FedWatch Tool, the probability of the Fed cutting the benchmark interest rate by 0.25% points in September is being priced at 93.8%. In the afternoon, with the probability of a 'big cut' (a 0.5% point reduction) newly appearing, the probability of a 0.25% point cut decreased slightly. The probability of a 0.5% point cut is reflected at 6.2%.

Particularly, buying was concentrated on small- and mid-cap stocks and traditional stocks, which are expected to benefit more significantly from a rate cut.

The Russell 2000 index, which consists mainly of small- and mid-cap stocks, surged nearly 2% today. Following yesterday's 2.99% surge, the two-day rise is close to 5%. The expectation is that as rates fall, funding costs for smaller companies will drop, leading to significant earnings improvement.

The Dow, largely comprised of blue-chip stocks, also rose more than 1%, marking a second straight day of gains over 1%. Excluding technology and consumer staple stocks within the index, gains were broad-based, with materials and healthcare showing especially strong advances.

U.S. government officials pressuring for a rate cut also contributed to this atmosphere. U.S. Treasury Secretary Scott Besant said in a foreign media interview, “From September, consecutive rate cuts starting with a 'big cut' are possible.”

Ross Mayfield, investment strategist at Baird, analyzed that strong second quarter corporate earnings provided another catalyst for the market. “This round of results was truly impressive,” he said, adding, “Despite numerous headwinds throughout the summer, companies showed resilience and excellent business diversification.”

On the other hand, Austan Goolsbee, President of the Federal Reserve Bank of Chicago, stated in public remarks, “We don’t want inflation to come back again,” maintaining a cautious stance on rate cuts.

By sector, all sectors except consumer staples, technology, and communication services were strong.

As small- and mid-cap stocks gain prominence, large technology stocks lagged somewhat in popularity. Among tech giants with market values over $1 trillion, only Apple and Amazon rose more than 1%, while the rest declined. Netflix and Palantir also dropped by more than 1%. The Philadelphia Semiconductor Index rose 0.9%. AMD advanced 5.37%, while ASML, Qualcomm, and Lam Research all closed with gains exceeding 1%.

Conversely, Mediterranean fast-food chain Cava plunged more than 16% after its Q2 revenue missed expectations and it lowered its annual same-store sales outlook. AI infrastructure firm CoreWeave plummeted 20% after posting mixed quarterly results.

The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) dropped 0.24 points (1.63%) to close at 14.49.

Reporter Gojung Sam, Hankyung.com jsk@hankyung.com