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(Seoul=Yonhap Infomax) International Economics Department = On the 25th (U.S. Eastern Time), all three major U.S. stock indices closed higher in New York.
Although the market initially plunged on deteriorating investor sentiment toward Nvidia, stocks rebounded on renewed optimism for the artificial intelligence (AI) sector.
However, both Nvidia and AMD failed to recover by the close, highlighting a split in investor sentiment even within the AI theme.
U.S. Treasury prices rose for a fourth consecutive session, led by short-term maturities, steepening the yield curve (bull steepening).
Amid a string of disappointing U.S. economic indicators, foreign media reported that Kevin Hassett, economic adviser to former President Donald Trump and current White House National Economic Council (NEC) member, is a leading candidate for the next Federal Reserve (Fed) chair.
Federal Reserve Governor Steven Myron told Fox Business Network, "We must recognize that unemployment continues to rise, which is a result of overly restrictive monetary policy."
Myron added, "Given the economic outlook, I do not think this situation is appropriate," and said, "I believe it is right to cut rates quite rapidly."
The U.S. dollar weakened. The dollar index (DXY), which measures the greenback against six major currencies, fell below the 100 mark.
Expectations for a peace agreement between Russia and Ukraine, combined with weak U.S. employment and consumption data, put downward pressure on the dollar. News regarding Hassett as a potential Fed chair also weighed on the currency.
New York oil prices reversed course and fell sharply in a single day. Hopes for an end to the Ukraine war raised concerns about increased supply.
ABC News reported that the Ukrainian delegation had reached an agreement with the U.S. on the terms of a potential peace deal, while President Trump stated at the White House, "I think we are very close to an agreement (on ending the war)."
Trump also wrote on Truth Social, "Only a few differences remain," and, "I expect Presidents (Volodymyr) Zelensky and Putin to meet directly soon, but only if a deal to end the war is in its final or near-final stage."
Stock Market
On the 25th (U.S. Eastern Time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed up 664.18 points (1.43%) at 47,112.45.
The S&P 500 rose 60.76 points (0.91%) to 6,765.88, while the Nasdaq Composite gained 153.59 points (0.67%) to finish at 23,025.59.
The AI industry continued to experience seismic shifts, driven by the launch and positive reception of Google's Gemini 3.0 and the expansion potential of its Tensor Processing Unit (TPU).
The main catalyst for the market was a report that Meta Platforms Inc. is considering purchasing Google's TPUs.
U.S. online media outlet The Information reported, "Meta is considering introducing Google's TPUs to its data centers by 2027."
Meta, previously a major buyer of Nvidia's GPUs, is now reportedly considering Google's TPUs, putting downward pressure on Nvidia and upward pressure on Google.
Nvidia shares plunged more than 7% intraday on the news, before paring losses to close down 2.59%. The development fueled concerns that the AI industry is no longer revolving solely around Nvidia. AMD also fell more than 4%.
Nvidia was the only member of the 'Magnificent 7' tech giants to decline. Alphabet, Google's parent company, rose more than 1% on the TPU expansion news, while Meta jumped 3.78%.
Meta's stock had dropped 20% in recent weeks following a large-scale capital expenditure plan. The potential adoption of TPUs, which are less costly than GPUs, eased concerns and supported the share price.
Ron Albahari, CIO at LNW, said, "As computing costs fall, consumption is likely to increase," adding, "Meta's purchase of Google chips is a real-time example, and it's a positive signal for the broader AI sector."
Broadcom, a leader in the custom AI chip (ASIC) market, also gained nearly 2% on optimism for the TPU market. Broadcom's market cap reached $1.818 trillion, widening the gap with Tesla and Meta. The term 'M7' excluding Broadcom is becoming less relevant.
Key economic indicators supported expectations for a Fed rate cut in December.
The U.S. September Producer Price Index (PPI) rose 0.3% month-on-month, in line with market expectations.
September retail sales increased 0.2% month-on-month, below the 0.4% forecast and down from August's 0.6% rise, indicating a clearer slowdown in consumption.
Slowing consumption and moderate inflation could give the Fed room to cut rates.
Albahari noted, "Until last Friday, the probability of a December rate cut was priced at 40%, but now it's over 80%. I've never seen such volatility in expectations in just a few days, which shows how intensely the market is focused on this issue."
By sector, healthcare rose more than 2%, with industrials, financials, consumer discretionary, materials, communication services, and consumer staples also gaining.
While sentiment was mixed within tech, buying concentrated in blue chips and traditional industrials, pushing the Dow up more than 1%. Of the 30 Dow components, 28 rose, with only Nvidia and Chevron declining.
Optimism spread on news that Ukraine had agreed to a peace deal with Russia.
President Trump said, "We are very close to an agreement" regarding the peace deal.
According to CME FedWatch Tool, the federal funds futures market priced in an 82.7% chance of a 25bp rate cut in December, down from 84.4% at the previous close.
The CBOE Volatility Index (VIX) fell 1.96 points (9.55%) to 18.56.
Bond Market
According to Yonhap Infomax's overseas rates screen (screen number 6532), as of 15:00 (U.S. Eastern Time) on the 25th, the 10-year U.S. Treasury yield was 4.0020%, down 3.50bp from the previous day's 15:00 close.
The 2-year yield, sensitive to monetary policy, fell 4.60bp to 3.4590% over the same period.
The 30-year yield, the longest maturity, dropped 1.90bp to 4.6580%.
The 10-year/2-year yield spread widened slightly from 53.20bp to 54.30bp.
Bond yields and prices move inversely.
U.S. Treasury yields, which had been range-bound, began to decline in New York trading as investors digested disappointing economic data, including continued declines in weekly private employment figures.
According to ADP, a private employment data provider, preliminary U.S. private employment fell by an average of 13,500 per week over the four weeks ending on the 8th, widening from the previous week's 7,500 drop and marking a third straight week of declines.
ADP Chief Economist Nela Richardson said, "As we enter the (Thanksgiving) holiday period, there are still questions about consumer purchasing power," noting that this could delay or reduce job creation.
Subsequent data from the U.S. Department of Commerce showed September retail sales rose 0.2% month-on-month, a slowdown from August's 0.6% and below the 0.4% forecast.
Core retail sales (control group), which exclude volatile items such as autos, gasoline, building materials, and food services and are used in GDP PCE calculations, fell 0.1% month-on-month, the first decline since April.
The U.S. Department of Labor reported that the September PPI rose 0.3% month-on-month, in line with expectations. Core PPI, excluding food and energy, rose 0.1%, below the 0.2% forecast.
The Conference Board's November Consumer Confidence Index fell 6.8 points to 88.7, the lowest since April (85.7) and below the 93.5 consensus.
Ben Ayers, senior economist at Nationwide, said, "Despite the deterioration in the (CB) survey, spending has held up throughout 2025, but with inflation and labor market concerns, many consumers may have reached their limits, at least in the short term."
Around midday, foreign media reported that Hassett was considered a leading candidate for the next Fed chair among Trump's inner circle.
The report triggered a broad decline in Treasury yields, especially in the 2-year. The 10-year yield briefly fell to 3.9870%, dipping below 4.0% for the first time since October 29.
Hassett previously served as Chair of the White House Council of Economic Advisers (CEA) during Trump's first term, actively supporting Trump's economic policies, including tariffs, and aligning with his criticism of the Fed.
Long-term yields pared losses in late trading as risk appetite strengthened on reports of Hassett's candidacy. The 10-year yield edged back above 4.0%.
The 5-year Treasury auction in the afternoon saw weak demand, with yields set above market expectations.
According to the U.S. Treasury, the $70 billion 5-year note auction produced a yield of 3.562%, down 6.3bp from last month's 3.625% and the lowest since September last year.
The bid-to-cover ratio was 2.41, up from 2.38 last month and above the six-month average of 2.36.
The auction yield was 0.5bp above the when-issued yield, indicating weaker-than-expected demand.
According to CME FedWatch, as of 15:46 in New York, the federal funds futures market priced in an 82.7% chance of a 25bp Fed rate cut in December, with only a 17.3% chance of a hold.
Foreign Exchange Market
According to Yonhap Infomax (screen number 6411), as of 16:00 (U.S. Eastern Time) on the 25th, the dollar-yen exchange rate stood at 156.101 yen, down 0.731 yen (0.466%) from the previous New York close of 156.832 yen.
The dollar index fell 0.342 points (0.341%) to 99.842.
The dollar came under pressure just before New York trading on news of a possible ceasefire agreement between Russia and Ukraine.
ABC News reported that the Ukrainian delegation had agreed with the U.S. on the terms of a potential peace deal.
A U.S. official told ABC, "Ukraine has agreed to the peace deal," adding, "There are a few details to finalize, but they have agreed."
On the New York Mercantile Exchange, January West Texas Intermediate (WTI) crude plunged to the $57 per barrel range, and easing inflation concerns, combined with falling Treasury yields, pushed the dollar index below 100.
Weak U.S. economic data further accelerated the dollar's decline.
According to ADP, preliminary U.S. private employment fell by an average of 13,500 per week over the four weeks ending on the 8th.
U.S. September retail sales were $733.3 billion on a seasonally adjusted basis, up 0.2% month-on-month but below the 0.4% forecast.
Meanwhile, the September PPI rose 0.3% month-on-month, matching expectations.
Reports that Hassett is a leading candidate for Fed chair also weighed on the dollar. Hassett has downplayed inflation risks and advocated for rate cuts at the Fed.
According to CME FedWatch, as of 16:01 in New York, the federal funds futures market priced in an 82.7% chance of a 25bp rate cut in December.
The dollar index fell as low as 99.652 during the session on these developments.
The euro-dollar exchange rate rose 0.00428 (0.371%) to 1.15651.
As geopolitical tensions eased on hopes for a Russia-Ukraine ceasefire, the euro-dollar rate briefly climbed to 1.5870.
Gabriel Makhlouf, Governor of the Central Bank of Ireland and ECB policymaker, said, "I am somewhat concerned about the current level of services inflation," adding, "It is higher than it should be."
The euro-yen rate fell 0.180 (0.100%) to 180.52.
The pound-dollar rate rose 0.00537 (0.410%) to 1.31621.
Market participants are watching the UK government's autumn budget statement on the 26th.
Francesco Pesole, FX strategist at ING, noted heightened market concerns over the pound and pointed to a sharp rise in related option volatility.
He explained, "The one-day implied volatility for euro-pound is much higher than realized volatility, the highest since the 2022 mini-budget crisis under Liz Truss."
The offshore dollar-yuan (CNH) rate fell 0.0200 (0.282%) to 7.0847.
Oil Market
On the 25th (U.S. Eastern Time) at the New York Mercantile Exchange, January West Texas Intermediate (WTI) crude fell $0.89 (1.51%) to $57.95 per barrel, the lowest close since October 21.
Earlier, ABC News reported that the Ukrainian delegation had agreed with the U.S. on the terms of a potential peace deal. A U.S. official told ABC, "Ukraine has agreed to the peace deal," adding, "There are a few details to finalize, but they have agreed."
President Trump also expressed optimism, saying at the White House's Thanksgiving turkey pardon ceremony, "I think we are very close to an agreement (to end the war)," and, "We will get there."
Priyanka Sakdeva, senior market analyst at Phillip Nova, wrote in a report, "The biggest short-term risk is oversupply, and current price levels appear vulnerable."
WTI at one point plunged nearly 3%, threatening the $57 level, but pared losses as the dollar weakened during the session. As oil is priced in dollars, a weaker dollar can boost demand among buyers using other currencies.
The dollar index (DXY), which tracks the greenback against six major currencies, fell below 100 in New York trading. The euro strengthened on hopes for an end to the Ukraine war.
Bloomberg also reported that Kevin Hassett, White House NEC member and Trump economic adviser, is a leading candidate for the next Fed chair, contributing to dollar weakness.
Hassett, seen as the most dovish (pro-easing) among Fed chair candidates and likely to support Trump's desired rate cuts, has consistently downplayed inflation risks and advocated for monetary easing.
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