[New York Market Briefing] New York stocks rise together on hopes of rate cuts

The three major U.S. stock indices all rose. Dovish remarks by John Williams, president of the Federal Reserve Bank of New York, increased expectations of a policy rate cut by the U.S. central bank (Fed). News that the Trump administration is considering easing export controls to allow Nvidia to sell some graphics processing units (GPUs) to China also bolstered investor sentiment. In effect, both the Fed and the administration issued a 'put' (a market countermeasure likened to a put option).

On the 21st (local time) near the close at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average finished at 46,245.41, up 493.15 points (1.08%) from the previous session. The S&P 500 index rose 64.23 points (0.98%) to 6,602.99, and the Nasdaq Composite closed at 22,273.08, up 195.03 points (0.88%).

The New York market came under bullish pressure from Williams's remarks. In a speech at the Chilean central bank's 100th anniversary conference in Santiago, Chile, Williams said, "I still see that it could be appropriate to make an additional adjustment to the target range for the federal funds rate (FFR) in the near term to move policy closer to a neutral range." Williams serves as the ex officio vice chair of the Federal Open Market Committee (FOMC) and votes at every meeting.

John Bellis, macro strategist at Bank of New York (BNY) Mellon, said, "Williams is generally regarded as being aligned with Chair (Jerome) Powell," adding, "If Williams supports a near-term rate cut as he indicated, it raises expectations that Chair Powell would think the same."

According to CME FedWatch, the FFR futures market priced in a 71.5% probability that the Fed will cut rates by 25bp in December as of about 4:11 p.m. in New York. This is more than a 30 percentage point increase from the previous day (39.1%).

Louis Navellier, chief investment officer (CIO) of Navellier & Associates, predicted, "It is hard to call this the bottom of the correction now, but if the December rate cut that the market expects materializes, there is a good chance the stock market could noticeably revive in December."

The three major New York indices were all up more than 1% around midday on the back of hopes for rate cuts. The market gained further upward momentum on reports that the Trump administration is considering lifting export controls on some GPUs.

Bloomberg reported that the Trump administration is internally considering allowing sales of Nvidia's GPU 'H200' to China. The U.S. has imposed export restrictions on advanced GPUs since 2022, but the possibility of lifting controls for some products has opened. On this news, AI-related stocks, led by Nvidia, came under broadly bullish pressure.

However, the market remains conscious of debates over an AI bubble. Ben Inker, co-head of asset allocation at GMO, said, "AI is priced too high now and speculative moves are pronounced, so it looks like a classic bubble," adding, "Investors are uneasy that it may be a bubble, but because they are not certain, there is a mood of accepting that 'this must be how market prices are supposed to be.'" Because of these concerns, the Nasdaq finished by giving back more than half of its gains from the peak.

On the day, all sectors rose, including 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 (0.01%) had the smallest gain.

The fortunes of the 'Magnificent Seven,' the seven giant tech companies, diverged. Nvidia, the AI leader, which plunged as much as 4.27% intraday, closed having recovered much of that loss (-0.97%). Alphabet, Google's parent company (Alphabet A class), rose 3.56%. Amazon (1.63%), Apple (1.97%), and Meta Platforms (0.87%) also showed gains. Meanwhile, Tesla (-1.05%) and Microsoft (-1.32%) lagged.

Semiconductor stocks such as Micron Technology (2.98%), Qualcomm (2.32%), and Intel (2.62%) generally showed strength. AMD, Nvidia's GPU rival, fell 1.09%. Apparel company Gap surged 8.24% after its quarterly results exceeded market expectations.

The CBOE Volatility Index (VIX) plunged 2.99 points (11.32%) to 23.43 from the previous session.

Park Su-rim, Hankyung.com reporter paksr365@hankyung.com