[New York Stock Market] Dow Down 1.01% Amid Home Depot Earnings Decline and Debt Negotiation Concerns...

The three major indices of the U.S. New York stock market all closed lower on the 16th (local time), as investor sentiment worsened due to Home Depot's disappointing earnings and earnings guidance, while closely watching the results of the second meeting between President Joe Biden and House Speaker Kevin McCarthy regarding the debt ceiling.

At the New York Stock Exchange (NYSE) that day, the Dow Jones Industrial Average fell 336.46 points (1.01%) from the previous session to close at 33,012.14. The large-cap focused S&P 500 index dropped 26.38 points (0.64%) to 4,109.90, and the tech-heavy Nasdaq index declined 22.16 points (0.18%) to close at 12,343.05.

In the S&P 500 index, all nine sectors except technology and telecommunications stocks fell. The declines in energy, real estate, and utilities stocks each exceeded 2%. Home Depot's earnings, announced before the market opened, fell short of Wall Street expectations, and the company lowered its annual guidance, causing its shares to drop more than 2% from the previous session. Consequently, retail giants Walmart and Target, scheduled to report earnings this week, also saw their stock prices fall by 1.38% and 1.62%, respectively.

Horizon Therapeutics plunged about 14% following foreign media reports that the U.S. Federal Trade Commission (FTC) is preparing a lawsuit to block Amgen's acquisition of Horizon. On the other hand, Alphabet, Google's parent company, rose 2.57% on news that Pershing Square Capital Management, led by Bill Ackman, secured a stake. Capital One jumped more than 2% after Berkshire Hathaway, led by Warren Buffett, disclosed a new purchase.

[Image source=Reuters Yonhap News]

Investors checked the U.S. consumption situation through economic indicators and Home Depot's earnings that day, while also monitoring the debt ceiling meeting between President Biden and congressional leaders, which began at 3 p.m.

Home Depot's first-quarter earnings per share, released before the market opened, were $3.82, exceeding Wall Street's forecast of $3.80, but revenue fell short of consensus at $37.26 billion. The company also significantly lowered its annual earnings guidance, immediately dampening investor sentiment. Meanwhile, U.S. retail sales for April rebounded despite recession concerns but missed Wall Street expectations. According to the U.S. Department of Commerce, April retail sales increased by 0.4% month-over-month, marking a rebound after a long time. Wall Street consensus was between 0.7% and 0.8%.

Bill Merz of U.S. Bank Wealth Management said, "Since mid-November, the market has been stuck in a range of 3,800 to 4,200 on the S&P 500 index," adding, "This reflects the uncertainty investors feel about what is happening on the policy front." He also questioned how long consumers can continue spending. Walmart and Target are scheduled to release earnings the following day.

Warnings surrounding the debt ceiling increase are growing louder. U.S. Treasury Secretary Janet Yellen reiterated that if Congress does not promptly raise the debt ceiling, the government could face a default as early as June 1. She warned, "It could lead to a severe recession like the Great Depression," emphasizing, "There is no time to waste. Congress must resolve the debt ceiling issue as soon as possible." With the Senate scheduled to recess for Memorial Day from May 22 to 29, the deadline is even tighter. The White House reportedly decided to scale back President Biden's originally planned overseas trip to focus on debt ceiling discussions.

Market observers predict that even if the worst-case scenario of default is avoided, the closer the so-called X-day?when cash runs out?approaches, the more inevitable the repercussions such as a sharp stock market decline will be. Moreover, the U.S. economy is already facing heightened recession concerns due to over a year of aggressive tightening by the Federal Reserve and recent events like the Silicon Valley Bank (SVB) collapse. Secretary Yellen is also scheduled to meet on the 18th in Washington with executives from major banks, including Jamie Dimon of JPMorgan Chase. CNN reported that debt ceiling and banking sector crises are expected to be major topics at this meeting.

Anthony Tchoumba of Loop Capital said, "The current market does not reflect the risk of a failed debt ceiling negotiation," expressing concern that if a default materializes, it would be a disaster for the U.S. economy. Jeffrey Kleintop, Chief Global Investment Strategist at Charles Schwab, told CNBC that "a U.S. default would challenge the dollar's status as a safe-haven asset," and predicted it would benefit other major safe-haven currencies such as the yen.

This week, remarks from Federal Reserve Chair Jerome Powell and other officials are expected to continue. Investors are likely to seek hints about future monetary policy through these statements. According to the CME FedWatch tool, as of the afternoon of that day, federal funds futures markets reflected an over 82% probability that the Fed will hold rates steady in June. The probability of an additional "baby step" rate hike stands in the 17% range. The Fed, which declared war on inflation, has raised the U.S. benchmark interest rate 10 consecutive times since March last year, bringing it to 5.0-5.25%.

In the New York bond market, the 10-year U.S. Treasury yield rose to around 3.53%. The 2-year Treasury yield, sensitive to monetary policy, increased to about 4.07%. The dollar index, which measures the dollar's value against six major currencies, showed a slight rise to around 102.6 compared to the previous session.

International oil prices fell due to weak Chinese retail sales and industrial production data released the previous day. On the New York Mercantile Exchange, June delivery West Texas Intermediate (WTI) crude oil closed at $70.86 per barrel, down 25 cents (0.35%) from the previous session.

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