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(Seoul=Yonhap Infomax) International Economics Department = On the 21st (U.S. Eastern Time), all three major U.S. stock indices rebounded in the New York financial markets.
Risk appetite strengthened as expectations for a Federal Reserve (Fed) rate cut grew following dovish remarks from John Williams, President of the Federal Reserve Bank of New York. News that the Trump administration is considering easing export controls to allow Nvidia Corp. to sell certain graphics processing units (GPUs) to China also buoyed equities.
Both the U.S. central bank and the administration appeared to offer a ‘put’—a market backstop reminiscent of a put option.
U.S. Treasury prices rose for a second consecutive session, with mid- and short-term maturities seeing the largest gains.
Williams, widely regarded as the Fed’s de facto third-in-command, fueled a sharp rise in expectations for a December rate cut. The probability of a cut reflected in futures markets surged to nearly 70%, overtaking bets on a hold.
The U.S. dollar index fell for the first time in six sessions.
Williams’ comments also reverberated in Japan, where Bank of Japan (BOJ) officials issued a series of hawkish signals on rate hikes. Despite concerns over fiscal soundness, the yen posted a rare sharp rally.
New York oil prices declined for a third straight session as the U.S. pushed for a resolution to the war in Ukraine, with WTI futures retreating to a one-month low, moving further away from the $60 per barrel mark.
In a speech at the Central Bank of Chile’s centennial conference early in the day, Williams stated, “I still see the possibility of further adjustments to the target range for the federal funds rate (FFR) in the near term to bring policy closer to neutral.”
The U.S. Bureau of Labor Statistics (BLS) announced it will not release the October Consumer Price Index (CPI). The November CPI will be published on the 18th of next month.
Given that the Federal Open Market Committee (FOMC) meeting is scheduled for December 9–10, policymakers will have to decide on rates without the latest CPI data.
Stock Market
At the close on the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 493.15 points (1.08%) to 46,245.41.
The S&P 500 gained 64.23 points (0.98%) to 6,602.99, while the Nasdaq Composite advanced 195.03 points (0.88%) to 22,273.08.
U.S. equities were buoyed by Williams’ dovish remarks. Speaking at the Central Bank of Chile’s centennial event in Santiago, Williams reiterated his openness to further near-term adjustments to the FFR to bring policy closer to neutral.
As the FOMC’s vice chair, Williams holds a permanent vote on policy decisions.
John Velis, macro strategist at BNY Mellon, noted, “Williams is typically seen as aligned with Chair Jerome Powell. If Williams is signaling support for a near-term rate cut, markets will expect Powell to be on board as well.”
According to CME FedWatch, as of 16:11 in New York, the FFR futures market priced in a 71.5% chance of a 25bp rate cut in December, up more than 30 percentage points from the previous day’s 39.1%.
Louis Navellier, CIO at Navellier & Associates, commented, “It’s too early to call this the bottom of the correction, but if the anticipated December rate cut materializes, equities could see a notable rebound that month.”
All three major indices posted gains of over 1% by midday, driven by rate cut hopes.
Stocks received an additional boost from reports that the Trump administration is considering lifting export controls on certain Nvidia GPUs for China. Bloomberg reported that the administration is internally reviewing a plan to allow sales of Nvidia’s H200 GPU to China, potentially easing restrictions imposed since 2022 on advanced GPUs.
This news sparked a rally in Nvidia and other AI-related stocks. The Philadelphia Semiconductor Index (SOX), heavily weighted toward AI and chipmakers, surged as much as 2.42% intraday.
However, concerns about an AI bubble persist. Ben Inker, co-head of asset allocation at GMO, said, “AI stocks are priced too high and show clear signs of speculative behavior—classic bubble territory. Investors are uneasy about a potential bubble, but many accept current market prices as the new normal.”
Reflecting these concerns, the Nasdaq gave back more than half of its intraday gains by the close.
All sectors advanced, led by communications (2.15%), healthcare (2.11%), materials (2.10%), consumer staples (1.74%), real estate (1.30%), industrials (1.20%), and financials (1.09%). Utilities posted the smallest gain at 0.01%.
The so-called Magnificent 7 tech giants saw mixed results. Nvidia, the AI bellwether, rebounded from an intraday plunge of 4.27% to close down just 0.97%. Alphabet (Class A) jumped 3.56%, while Amazon (1.63%), Apple (1.97%), and Meta Platforms (0.87%) also gained. Tesla (-1.05%) and Microsoft (-1.32%) lagged.
Semiconductor stocks such as Micron Technology (2.98%), Qualcomm (2.32%), and Intel (2.62%) were broadly higher, while AMD, Nvidia’s GPU rival, slipped 1.09%.
Apparel retailer Gap surged 8.24% after quarterly results beat expectations.
The CBOE Volatility Index (VIX) tumbled 2.99 points (11.32%) to 23.43.
Bond Market
According to Yonhap Infomax’s overseas rates screen (No. 6532), as of 15:00 in New York, the 10-year Treasury yield fell 4.20bp to 4.0630% from the previous day’s close.
The policy-sensitive 2-year yield dropped 4.40bp to 3.5140%, while the 30-year yield declined 1.60bp to 4.7150%.
The 10-2 year yield spread widened slightly from 54.70bp to 54.90bp.
Bond yields move inversely to prices.
Williams’ dovish comments had a pronounced impact on the 2-year yield, which at one point fell to 3.4910%, the lowest since October 28.
Krishna Guha, economist at Evercore ISI, wrote, “Williams’ intervention signals that the Fed leadership has not abandoned the idea of rate cuts. While not definitive, it’s reasonable to interpret it as more than just a placeholder.”
Thomas Graff, CIO at Facet, added, “Everyone is focused on a possible December rate cut. Williams’ remarks have led markets to expect further support for easing.”
However, other regional Fed presidents voiced opposition to a December cut. Boston Fed President Susan Collins said in an interview that holding rates steady is “appropriate for now” due to inflation concerns. Dallas Fed President Lorie Logan reiterated her opposition to a December cut.
Steven Myron, a former economic adviser to President Donald Trump, indicated he would vote for a 25bp cut if his vote proved decisive at the December FOMC, having previously advocated for 50bp cuts in September and October.
The University of Michigan’s final November consumer sentiment index was revised up to 51.0, 0.7 points above the preliminary reading but 2.6 points below the previous month’s final figure, marking the lowest since June 2022 (50.0).
Joanne Hsu, director of consumer surveys at Michigan, noted, “Sentiment improved slightly after the end of the federal government shutdown, but consumers remain dissatisfied with persistent high prices and weakening incomes.”
The U.S. Treasury will auction 2-, 5-, and 7-year notes over three consecutive days starting Monday, the 24th, a day earlier than usual due to the Thanksgiving holiday on the 27th.
According to CME FedWatch, as of 15:41 in New York, the FFR futures market priced in a 69.5% chance of a 25bp cut in December, up sharply from 39.1% the previous day. The probability of a hold plunged from 60.9% to 30.5%.
Foreign Exchange Market
According to Yonhap Infomax (screen No. 6411), as of 16:00 in New York, the dollar-yen rate stood at 156.390 yen, down 1.187 yen (0.753%) from the previous session’s close of 157.577 yen.
The euro-yen rate fell 1.500 yen (0.826%) to 180.13 yen from 181.63 yen, snapping a five-session winning streak and halting its run of record highs.
The dollar index (DXY), which measures the greenback against six major currencies, slipped 0.094 points (0.094%) to 100.157 from 100.251. It briefly dipped to 99.989 in European trading before rebounding above 100 after eurozone data came in slightly weaker than expected.
The euro-dollar rate edged down 0.00076 (0.066%) to 1.15185 from 1.15261, marking a sixth straight decline.
According to S&P Global and Hamburg Commercial Bank (HCOB), the eurozone’s preliminary composite PMI for November was 52.4, above the 50 threshold for expansion but just below the prior month and market consensus of 52.5.
Williams’ remarks pushed the probability of a December rate cut in the futures market to around 70%, sharply outpacing bets on a hold.
Following Williams’ speech, comments from BOJ Policy Board member Masazuki Mas signaled that a rate hike decision is “drawing closer.” In an interview published at midnight Japan time on the 22nd, Mas said, “I can’t say which month, but in terms of distance, we are close.” He emphasized, “While many countries are above neutral rates, Japan’s policy rate remains below neutral, and I strongly believe this needs to change soon.”
Earlier, BOJ Governor Kazuo Ueda told parliament that if the economy and prices evolve as expected, rate hikes will continue. The previous day, Policy Board member Junko Koeda argued that “real rates are negative and clearly low compared to other countries,” underscoring the need for normalization.
Takeshi Minami, chief economist at Norinchukin Research Institute, said, “Given these hawkish comments, the BOJ is likely to raise rates in December. The government does not want a weak yen and will tolerate rate hikes to counter it.”
The pound-dollar rate rose 0.00351 (0.269%) to 1.31051, while the offshore dollar-yuan (CNH) rate fell 0.0136 (0.191%) to 7.1047.
Oil Market
On the New York Mercantile Exchange, January West Texas Intermediate (WTI) crude settled at $58.06 per barrel, down $0.94 (1.59%) from the previous session—the lowest close since October 21.
WTI briefly plunged as much as 2.8% to the mid-$57 range before paring losses late in the session.
President Donald Trump set November 27 as the deadline for a peace deal to end the Russia-Ukraine war, telling Fox News Radio, “I’ve set many deadlines, and sometimes they get extended if things go well, but this time, Thursday (November 27) seems appropriate.”
The Trump administration’s draft 28-point peace plan reportedly includes recognizing the Luhansk, Donetsk, and Crimea regions as Russian territory, though it remains unclear whether Ukraine will accept.
Ukrainian President Volodymyr Zelensky said in a Telegram video, “Ukraine is facing one of the most difficult moments in its history,” vowing not to betray the country in negotiations.
Analysts at Saxo Bank noted, “Sanctions on Russian oil majors Rosneft and Lukoil are set to take effect, but oil prices fell as the U.S. pressured Ukraine to accept a ceasefire proposal.”
Sanctions on companies dealing with Rosneft and Lukoil took effect today, and Lukoil must divest large overseas portfolios by December 13.
jwchoi@yna.co.kr
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