[New York Stock Market] Watching FOMC Minutes and Earnings... Dow Falls for the First Time in 6 Trading Days

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York stock market closed lower on the 17th (local time), as investors monitored retail data and the minutes of the July Federal Open Market Committee (FOMC) meeting. Although the July minutes were less hawkish than initially feared, disappointing earnings from retailer Target and worse-than-expected inflation data from the UK cooled investor sentiment.

On the New York Stock Exchange (NYSE) that day, the Dow Jones Industrial Average fell 171.69 points (0.50%) from the previous close to finish at 33,980.32. The blue-chip Dow index turned negative after six consecutive trading days of gains. The large-cap S&P 500 index closed down 31.16 points (0.72%) at 4,274.04, while the tech-heavy Nasdaq index dropped 164.43 points (1.25%) to 12,938.12.

By stock, major tech companies such as Tesla (-0.84%), Meta (-2.57%), Alphabet (-1.77%), Nvidia (-2.88%), and Microsoft (-0.26%) all showed weakness. Apple’s stock rose 0.88% from the previous close following reports that it will hold an iPhone 14 launch event on September 7.

Retail giant Target slid 2.69% due to earnings far below market expectations. In contrast, Lowe’s closed up 0.58% after quarterly net income exceeded forecasts. Meme stock Bed Bath & Beyond surged 11.77%. Additionally, Manchester United’s (ManU) shares rose 6.96% on CEO Elon Musk’s acquisition joke. Insurance company Progressive closed up 3.73% after reporting record-high earnings.

Investors focused on retail sales data, corporate earnings, and the FOMC regular meeting minutes that day.

Consumption, which accounts for two-thirds of the U.S. economy, did not increase last month due to falling gasoline prices and a sharp drop in automobile purchases. The U.S. Department of Commerce reported that July retail sales were unchanged from the previous month, falling short of experts’ forecast of a 0.1% increase. Specifically, online shopping rose due to the Amazon Prime Day effect, while gas station sales and demand for home appliances were weak.

Retail giants Target and Lowe’s showed mixed earnings results. Unlike Walmart and Home Depot, which exceeded market expectations the previous day, Target’s quarterly net income plunged about 90%. Meanwhile, Lowe’s quarterly net income beat expectations, resulting in divergent stock performances.

The minutes of the July FOMC regular meeting, released in the afternoon, maintained the Federal Reserve’s (Fed) existing stance to continue raising interest rates until inflation falls significantly. The minutes stated, “Inflation remains well above the target (2%), and moving to a restrictive policy stance is essential for the Committee to fulfill its mandate of maximum employment and price stability.”

However, the Fed also left open the possibility of slowing the pace of rate hikes at some point. The minutes said, “As we assess the cumulative effects of monetary policy adjustments on economic activity and inflation, it seems appropriate at some point to slow the pace of rate increases.”

These minutes are considered less hawkish than initially feared but not as dovish as the market had hoped. Case Lerner, Co-CIO of Truist, said, “There were statements that could be interpreted as dovish, such as the possibility of slowing the pace, but Fed officials’ concerns about inflation remain the same. I don’t think there is a significant change from what people thought before the report was released.”

According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) futures market on that day priced in more than a 61% chance of a 0.5 percentage point rate hike in September, slightly up from 58% a week ago and 59% the day before.

In the New York bond market, Treasury yields rose. The yield on the U.S. 10-year Treasury note recovered to the 2.9% level. The UK’s inflation data, which exceeded 10%, caused UK bond yields to surge, impacting global bond markets including the U.S.

Oil prices rebounded as U.S. crude inventories declined. On the New York Mercantile Exchange, September West Texas Intermediate (WTI) crude oil prices closed at $88.11 per barrel, up $1.58 (1.8%) from the previous close. This was the first rebound in four trading days.