US Stock Market Declines as Investors Await Release of January PCE

The New York stock market fell this week as it awaits the release of January’s Personal Consumption Expenditures (PCE). This inflation indicator is a Federal Reserve (Fed) policy benchmark. The rise in US Treasury yields put pressure on the stock market.

On the 26th (local time), the Dow Jones 30 Industrial Average traded down 62.30 points (-0.16%) at 39,069.23. The Standard & Poor’s (S&P) 500 was down 19.27 points (-0.38%) at 5069.53, and the tech-centric Nasdaq index closed down 20.57 points (-0.13%) at 15,976.25.

The market is now focusing on releasing the US January PCE inflation index scheduled for the 29th, following the excitement over Nvidia’s earnings last week. According to Bloomberg, January’s PCE is expected to decrease from 2.6% to 2.4% from the previous month on a year-over-year basis and increase from 0.2% to 0.3% on a month-to-month basis. The core PCE, excluding food and energy, is expected to decline from 2.9% to 2.8% year-on-year and to increase from 0.2% to 0.4% month-on-month. Deutsche Bank predicted that the core PCE would rise by 0.36% from the previous month, stating, “This would be the highest increase since January last year. Although the year-on-year increase in PCE will decrease due to the high PCE increase in January of last year, the month-on-month increase rate is important.” Even if the year-on-year PCE slows as expected, it may be difficult to see it as an actual slowdown due to the high monthly increase.

Quincy Krosby of LPL Financial said, “If the PCE comes out lower than expected, there may be a resurgence of the May interest rate cut theory. On the other hand, if it exceeds expectations, there will be more consensus that the final journey to achieve the 2% inflation target is difficult.”

US Treasury yields rose on such expectations. The 10-year Treasury yield recorded 4.298%, up 4bp (1bp=0.01% point). The 2-year Treasury yield, sensitive to changes in the base rate, traded at 4.738%, up 5.1bp. This is the highest yield since November 27 last year. Treasury yields and prices move in opposite directions.

Nvidia’s stock rose 0.35%, and ARM rose 9.64%. Micron Technology’s stock price rose 4.02% after announcing that it began mass production of high-bandwidth memory chips for Nvidia’s graphics processing unit.

Zoom, which fell 0.44% during regular trading hours, is trading up over 12% in after-hours trading after announcing earnings after the market close. Zoom announced that it recorded $1.15 billion in revenue in the fourth quarter of last year and $0.95 in earnings per share (EPS). Revenues were higher than FactSet’s market forecast of $1.13 billion, while EPS was lower than the forecast of $1.15. However, Zoom provided a first-quarter earnings forecast of $1.18 to $1.20 per EPS. The market forecast was $1.13.

Kroger, a US supermarket chain, fell 1.97%. The Federal Trade Commission (FTC) filed a lawsuit to prevent Kroger’s plan to merge with another supermarket chain, Albertsons. The FTC claimed that the merger could increase consumer prices, lower worker wages, and worsen working conditions due to reduced competition.

Cryptocurrencies rose. Bitcoin is trading at $54,763, up 5.7% from 24 hours ago, crossing the $54,000 line during trading. Ethereum is also trading at $3,186, up 2.73%. Boosted by the rise in cryptocurrencies, the stock price of Coinbase, the largest cryptocurrency exchange in the United States, rose 16.85% on the day.

Oil prices rose. On the New York Mercantile Exchange, the price of West Texas Intermediate (WTI) crude oil for April delivery ended trading at $77.58 per barrel, up $1.09 (1.43%) from the previous day.