[New York Stock Market] Cautious Earnings Season... Mixed Close Near Flat Range

The three major indices of the U.S. New York stock market closed mixed near the flat line on the 19th (local time), digesting earnings results from companies such as Morgan Stanley amid concerns over tightening.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,897.01, down 79.62 points (0.23%) from the previous session. The S&P 500, which is centered on large-cap stocks, recorded 4,154.52, down 0.35 points (0.01%). Meanwhile, the tech-heavy Nasdaq index closed up 3.81 points (0.03%) at 12,157.23.

Within the S&P 500, utility, real estate, financial, healthcare, and consumer discretionary stocks rose, while telecommunications, technology, materials, and energy stocks declined. By individual stocks, Morgan Stanley closed up 0.67% despite a sharp drop in investment banking revenue, posting earnings that exceeded expectations. Netflix, which released its earnings after the previous day's close, fell more than 3% after delaying the timing of paid account sharing. Tesla dropped more than 2% after announcing a partial price cut for the Model Y ahead of its earnings release. Rivian fell 4.54% following RBC's target price downgrade.

[Image source=Reuters Yonhap News]

Investors monitored the economic situation while digesting major companies' earnings and the Federal Reserve's Beige Book. Morgan Stanley's first-quarter earnings per share were $1.70, beating market expectations. However, first-quarter investment banking revenue shrank by 24%, and trading revenue decreased by 13%, confirming recession concerns currently faced by Wall Street investment banks including Goldman Sachs. Tesla and IBM are scheduled to release earnings after the market close today. According to FactSet, first-quarter earnings for S&P 500-listed companies are estimated to have declined by 6.5% year-over-year.

BlackRock stated, "Investors are fearful of earnings, but corporate results have not yet reflected a mild recession," adding, "Investors are more interested in the future outlook than past corporate performance." Emanuel Cau of Barclays said, "The market is watching signs of weakening demand and factors that could worsen profitability in the second half of 2023," but added, "First-quarter earnings will not significantly change the situation," indicating that market positioning remains cautious. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's 'fear gauge,' fell more than 2% from the previous session to around 16.4.

Recent indicators such as employment, inflation, and consumption have repeatedly fallen short of market expectations, emphasizing economic slowdown, while the Fed's Beige Book, a report on economic conditions, was also released today. The Beige Book noted that following the Silicon Valley Bank (SVB) collapse, financial conditions worsened, leading to a general decline in loan volumes and loan demand nationwide among both consumers and businesses. It also assessed that overall economic activity in the U.S. had seen little change in recent weeks. However, signals were confirmed that the labor market overheating, which the Fed has been concerned about, is gradually cooling, as employment growth slowed in many regions.

Currently, the market strongly expects the Fed to implement a 0.25 percentage point rate hike?a baby step?in May. According to the Chicago Mercantile Exchange (CME) FedWatch tool, federal funds futures markets are pricing in over an 86% chance of a baby step in May as of this afternoon. Major foreign media outlets evaluated that the Beige Book supports the Fed's May baby step and a June pause. Expectations for rate cuts in the second half of the year have weakened compared to a few weeks ago. Raphael Bostic, president of the Federal Reserve Bank of Atlanta, appeared on CNBC yesterday and said, "One more move (a 0.25 percentage point rate hike) will be sufficient," but dismissed the possibility of cuts due to persistent high inflation.

Inflation indicators in the European region confirmed persistent price pressures. The UK's March Consumer Price Index (CPI) rose 10.1% year-over-year, exceeding market expectations of 9.8%. Following this, market speculation has spread that the Bank of England (BOE) will implement an additional 0.25 percentage point hike in May. On the same day, the Eurozone's March CPI rose 6.9% year-over-year, in line with expectations.

In the New York bond market today, U.S. Treasury yields rose slightly. The 10-year U.S. Treasury yield hovered around 3.6%, while the 2-year yield, sensitive to monetary policy, was around 4.2%. The Dollar Index, which measures the value of the dollar against six major currencies, rose about 0.2% from the previous session to around 101.9.

Oil prices fell below $80 per barrel as demand slowdown concerns weighed on the market. On the New York Mercantile Exchange, May delivery West Texas Intermediate (WTI) crude oil prices closed at $79.16 per barrel, down $1.70 (2.10%) from the previous day.

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