[New York Stock Market Briefing] Rate cut expectations rise as CPI slows ↑… Three major indices hit record highs

Major indices on the New York stock market closed at record highs. This came as the U.S. September Consumer Price Index (CPI) fell short of expectations, boosting expectations for a rate cut by the U.S. central bank (Fed).

On the 24th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 47,207.12, up 472.51 points (1.01%) from the previous day; the Standard & Poor's (S&P) 500 index finished at 6,791.69, up 53.25 points (0.79%); and the Nasdaq Composite closed at 23,204.87, up 263.07 points (1.15%).

All three major indices set new record highs both intraday and on the close.

Expectations for a rate cut due to slowing inflation encouraged a preference for risk assets.

The U.S. Department of Labor reported that September CPI rose 0.31% month-on-month, below the market forecast of a 0.4% increase and the prior month's 0.38% rise.

Core CPI, which excludes volatile food and energy items, rose 0.23%. On an annualized basis, it is close to the Fed's annual inflation target.

In particular, housing costs, which had been hard to rein in, rose just 0.2% month-on-month, the lowest since January 2021, drawing market attention.

Chris Zaccarelli, Chief Investment Officer (CIO) of Northlight Asset Management, said, "The Fed is cutting rates, and this report gives no reason to prevent a 25bp cut," adding, "With corporate profits rising, it is hard to find a reason this year's bull market would stop."

Buoyed by expectations of liquidity expansion, most large tech companies with market capitalizations above 1 trillion won advanced. NVIDIA rose 2.25%, Broadcom 2.86%, and Alphabet 2.67%. Only Tesla fell 3.4%.

The semiconductor sector was also strong. This was helped by confirmation of a rumor that Google had ordered TPUs worth tens of billions of dollars from Entropic. In addition, news that a paper due to be published suggests IBM can perform certain algorithms in quantum computing using AMD chips sent both companies' stocks soaring more than 7%.

However, Intel reported results that beat expectations, but its stock ended little changed.

With rate-cut expectations gaining momentum, bank stocks also performed well. JPMorgan Chase, Bank of America, and Wells Fargo each rose around 2%, and Goldman Sachs climbed more than 4%.

According to the CME FedWatch tool, federal funds futures priced in a 92.2% probability of a 50bp rate cut by December. The probability of a 75bp cut rose back to 4.7%.

The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) fell 0.93 points (5.38%) from the previous close to 16.37.

Han Kyung-woo, Hankyung.com reporter case@hankyung.com