[New York Stock Market] Despite Strong Earnings, All Stocks Fall Amid Sharp Rise in Treasury Yields... Nasdaq Down 0.85%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York Stock Exchange closed lower on the 19th (local time) as Treasury yields surged sharply despite smooth corporate earnings reports. The long-term benchmark, the U.S. 10-year Treasury yield, soared to its highest level since July 2008.

On the New York Stock Exchange (NYSE) that day, the Dow Jones Industrial Average closed at 30,423.81, down 99.99 points (0.33%) from the previous session. The large-cap S&P 500 index fell 24.82 points (0.67%) to 3,695.16, and the tech-heavy Nasdaq index dropped 91.89 points (0.85%) to 10,680.51.

By sector, Chinese-related stocks slid across the board. JD.com fell 7.72%, and Didi Global dropped 2.92%. Pharmaceutical stocks such as Moderna (-7.88%), BioNTech (-8.24%), and Pfizer (-2.22%) also showed weakness due to disappointing future earnings outlooks. Novavax declined 3.71% despite news that the U.S. Food and Drug Administration (FDA) approved its COVID-19 booster shot for adults for emergency use.

On the other hand, energy stocks rallied due to rising oil prices. ExxonMobil rose 2.97%, and Chevron jumped 3.24%. Additionally, Netflix, which reported earnings exceeding expectations the previous day, surged more than 13%. United Airlines also rose nearly 5% as both revenue and net income beat market forecasts. Tesla, which released earnings after the market close, ended up 0.84%.

Investors closely watched corporate earnings, Treasury yield movements, economic indicators, and the Federal Reserve's Beige Book that day. Despite ongoing recession concerns, major companies' earnings beating expectations marked a smooth start to the earnings season. According to Refinitiv, 69% of S&P 500-listed companies that have reported so far have posted results exceeding estimates.

However, CNBC reported that the high Treasury yields suggest that investors still harbor fears surrounding a recession. Demand for safe-haven Treasuries pushed prices down and yields up. In the New York bond market, the 10-year Treasury yield surged to 4.136%, marking the highest level since July 2008. The 2-year yield, sensitive to monetary policy, also jumped to around 4.55%.

Globally confirmed high inflation has strengthened expectations for further tightening by major countries. The UK's September Consumer Price Index (CPI) rose 10.1% year-over-year. The Eurozone's CPI also recorded a 9.9% increase.

Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, said in a speech that "core inflation continues to rise," pointing out that service and wage-related inflation are two key factors for future monetary policy direction. He emphasized, "We are looking for evidence that the upward trend has stopped, but have not found it yet," and added, "Until then, rate hikes should not be paused." According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds (FF) futures market currently reflects over a 95% probability that the Fed will raise rates by 0.75 percentage points in November.

The Beige Book released by the Fed that day also included a diagnosis that inflation remains high in the U.S. However, signs of labor market cooling in some regions have heightened concerns about a recession due to aggressive tightening. The Beige Book stated, "High interest rates, inflation, and supply chain disruptions are causing weak economic growth in the U.S.," and "Labor demand cooling has been reported in several regions."

Jeff Bezos, founder and chairman of the board of Amazon, the world's largest e-commerce company, also warned of a possible recession. On the previous night, Bezos posted a video on his Twitter of Goldman Sachs CEO David Solomon's interview with CNBC right after the Q3 earnings announcement, stating, "Yes, the current economic outlook tells us to prepare for a crisis." The video features Solomon saying, "There is a high likelihood of a recession in the U.S.," and "It is a time to be cautious."

The housing market has already been hit hard by rising interest rates. The U.S. Commerce Department reported that housing starts in September fell 8.1% from the previous month to 1.44 million units, below the market forecast of 1.46 million. Among these, single-family housing starts were 892,000 units, the lowest since May 2020. This is interpreted as a result of mortgage rates recently exceeding 7% due to the Fed's aggressive rate hikes.

Nick Collas of Data Trek Research said, "The corporate earnings season may somewhat help investor sentiment, which can support stock prices," but cautioned, "Investors should not expect too much from the rally until Treasury yields decline." This diagnosis indicates that risk aversion sentiment remains evident in the Treasury market.

The dollar also strengthened. The Dollar Index, which measures the value of the dollar against six major currencies, rose about 0.7% to around 113.

Oil prices rose despite the Biden administration's announcement of strategic petroleum reserve releases, due to declining crude inventories and rebound buying following recent declines. On the New York Mercantile Exchange, November West Texas Intermediate (WTI) crude oil closed at $85.55 per barrel, up $2.73 (3.30%) from the previous session.

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