[New York Stock Market] Rally on Strong US Consumption and Earnings... Nasdaq Up 1.79%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York Stock Exchange rallied on the 15th (local time) as retail data came out positively. The easing of Americans' inflation expectations somewhat softened the Federal Reserve's (Fed) outlook for aggressive tightening, and the better-than-expected bank earnings from Wells Fargo, Citigroup, and others also contributed to improved investor sentiment.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 31,288.26, up 658.09 points (2.15%) from the previous session. The S&P 500, centered on large-cap stocks, rose 72.78 points (1.92%) to 3,863.16, and the tech-heavy Nasdaq index closed at 11,452.42, up 201.24 points (1.79%). The small-cap Russell 2000 index also recorded a gain of 36.87 points (2.16%) to 1,744.37.

By sector, bank stocks led a broad rally. Wells Fargo, which reported earnings exceeding market expectations, closed up 6.17% from the previous session. Citigroup surged more than 13%, buoyed by better-than-expected results and confirmation of benefits from the rising interest rate environment. JPMorgan Chase, which had posted disappointing earnings and closed lower the previous day, rebounded 4.58%. Goldman Sachs closed up 4.36%.

Technology stocks also rose. Meta Platforms gained 4.21%, Netflix jumped 8.20%. Salesforce (+3.94%), Amazon (+2.64%), Tesla (+0.74%), and Microsoft (+1.04%) also showed upward trends.

Pinterest closed up 16.17% following news that activist hedge fund Elliott Management acquired more than a 9% stake. UnitedHealth Group also rose more than 5% on earnings that beat market expectations.

Investors closely watched the major economic indicators released that day, the Fed's expected pace of tightening, and newly disclosed corporate earnings. Despite soaring inflation, investor sentiment clearly improved on news that consumer spending, which accounts for two-thirds of the U.S. economy, returned to an upward trend.

According to the U.S. Department of Commerce, June retail sales, seasonally adjusted, increased 1.0% from the previous month to $680.6 billion. This marked a return to growth after a month. U.S. retail sales had increased for four consecutive months from January to April this year but slowed in May (-0.1%). Core retail sales rose 0.8% from the previous month.

The University of Michigan's inflation expectations index, which was expected to influence the Fed's tightening pace, declined. One-year ahead inflation expectations fell slightly to 5.2% from 5.3% the previous month. Long-term inflation expectations dropped more significantly from 3.1% to 2.8%. As consumers' inflation outlook cooled, expectations for aggressive Fed rate hikes also eased somewhat.

Thomas Simons, an economist at Jefferies, predicted that the likelihood of the Fed raising rates by 0.75 percentage points this month increased due to the decline in inflation expectations. Raphael Bostic, president of the Federal Reserve Bank of Atlanta, also expressed a negative view on large rate hikes, saying that rapid increases could weaken many things.

Earlier, with the June Consumer Price Index (CPI) rising over 9%, market bets for a 1.0 percentage point hike had increased. According to the Chicago Mercantile Exchange (CME) FedWatch, on the day the CPI was released two days ago, the federal funds (FF) futures market priced in over an 80% chance of a 1.0 percentage point rate hike in July, but this has since dropped to 30%.

Edward Moya of OANDA diagnosed the rally's background by saying, "The market believes the Fed will not raise rates by 1.0 percentage point at the end of this month and that the peak of tightening is near."

Along with this, unlike the disappointing earnings outlooks from JPMorgan Chase and Morgan Stanley the previous day, Wells Fargo and Citigroup's results provided investors with a new perspective to assess the economic condition.

In the New York bond market, the 10-year Treasury yield slipped to 2.92%. As the outlook for aggressive Fed tightening weakened, the yield curve inversion between the 2-year and 10-year notes narrowed compared to the previous day. However, the inversion phenomenon, often seen as a recession signal, continues.

Oil prices rose amid supply concerns as news spread that increasing crude production would be difficult despite U.S. President Joe Biden's visit to Saudi Arabia. On the New York Mercantile Exchange, August West Texas Intermediate (WTI) crude oil closed at $97.59 per barrel, up $1.81 (1.89%) from the previous session.

This content was produced with the assistance of AI translation services.