[New York Stock Market] Decline Amid Earnings Season Caution... Nasdaq Down 1.96%

[Asia Economy Reporter Yujin Cho] On the 30th (local time), major indices on the U.S. New York stock market all fell amid caution ahead of the Federal Reserve meeting and the earnings season. Concerns over the earnings of leading tech stocks such as Apple, Amazon, and Meta contributed to dampening investor sentiment.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,717.09, down 260.99 points (0.77%) from the previous session. The S&P 500, which focuses on large-cap stocks, fell 52.79 points (1.30%) to 4,017.77, and the tech-heavy Nasdaq index closed down 227.90 points (1.96%) at 11,393.81.

In recent weeks, the New York stock market has experienced increased volatility as signs of easing inflation and the resulting higher likelihood of the Federal Reserve ending its rate hikes have been evaluated. Over the past week, the Dow Jones rose 1.8%, while the S&P 500 and Nasdaq indices recorded gains of 2.5% and 4.3%, respectively.

The decline on this day appears to be driven by caution ahead of earnings announcements from major S&P 500 companies. On the 31st, key S&P 500 companies such as ExxonMobil, General Motors (GM), McDonald's, and UPS will announce their Q4 earnings for last year. Starting from the 1st of next month, major big tech companies including Meta, Apple, Amazon, and Alphabet will sequentially release their earnings.

Large-cap tech stocks at the top of the market capitalization rankings showed a simultaneous decline. Apple fell 2.01%, Amazon recorded a decline of around 1.6%, Alphabet dropped 2.74%, and Microsoft fell 2.20%, marking the largest drop among tech stocks.

Following news that Ford will cut prices on electric vehicles after Tesla, the No. 1 in the U.S. electric vehicle market, concerns over Tesla-driven electric vehicle price competition spread across the industry, causing major automakers' stock prices to fall sharply. Tesla's stock plunged 6.32%, while Ford and General Motors (GM) dropped 2.86% and 4.37%, respectively.

[Image source=Yonhap News]

Investors are also closely watching the Federal Open Market Committee (FOMC) meeting scheduled for the 1st. Ahead of the FOMC, indicators have repeatedly confirmed signs of easing inflation. The December price index estimated by the Personal Consumption Expenditures (PCE) rose 5.0% year-over-year, in line with market expectations. The core price index, excluding food and energy, also increased by 4.4%, matching market forecasts and marking the lowest figure since October 2021.

The market expects the Fed to narrow the rate hike to 0.25 percentage points at this FOMC. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) rate futures market currently reflects more than a 99% probability of a 0.25 percentage point rate hike in February.

Earlier, the Wall Street Journal (WSJ) reported that the Fed's rate hikes are nearing their end, and discussions about the timing of stopping rate increases could take place at this meeting.

Before the Fed, the Bank of Canada was the first among major central banks to signal a pause in rate hikes. Market concerns that excessive monetary tightening could unnecessarily trigger a recession are also a burden for the Fed.

However, some analyses suggest that optimism is premature. Larry Summers, former U.S. Treasury Secretary who was among the first to warn about inflation after the COVID-19 pandemic, stated that this FOMC is not the time to promise a halt to rate hikes.

Shima Shah, Chief Global Strategist at Principal Asset Management, forecasted, "Federal Reserve Chair Jerome Powell will emphasize at this meeting that the end of the rate hike cycle has not yet come."