[New York Stock Market] Decline Due to Hawkish Fed and Earnings Concerns... Nasdaq Down 1.68%

[Asia Economy New York=Special Correspondent Joselgina] The major indices of the U.S. New York stock market closed lower on the 8th (local time) as they digested concerns over corporate earnings and remarks from Federal Reserve (Fed) officials.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,949.01, down 207.68 points (0.61%) from the previous session. The large-cap S&P 500 index fell 46.14 points (1.11%) to 4,117.86, and the tech-heavy Nasdaq index dropped 203.27 points (1.68%) to 11,910.52.

[Image source=Reuters Yonhap News]

By sector, all 11 sectors of the S&P 500 index declined. Particularly, telecommunications, utilities, and technology stocks saw significant drops.

Mexican food chain Chipotle fell 4.96% after the previous day's market close due to earnings that missed expectations. Lumen Technologies also dropped nearly 21% following earnings guidance that fell short of Wall Street expectations. Conversely, Uber closed up 5.53% on better-than-expected earnings. Additionally, CVS Health agreed to acquire Oak Street Health for $10.6 billion including debt, causing the stocks of both companies to rise 3.47% and 4.48%, respectively. CVS also reported earnings that exceeded expectations. Google Alphabet fell 7.68% amid intensified AI competition and concerns over Bard's accuracy.

Investors closely watched corporate earnings announcements and Fed officials' remarks on the day. After market close, Walt Disney and Robinhood are scheduled to release earnings. In particular, Walt Disney's earnings report is attracting market attention as it is the first since Bob Iger returned as CEO.

According to Refinitiv, 42 companies listed on the S&P 500 index issued negative guidance for the first quarter. Refinitiv noted that the proportion of companies with below-average earnings expectations is much higher compared to before. Furthermore, among 297 companies that have reported fourth-quarter earnings so far, 69% have exceeded Wall Street estimates.

Eric Sturner, Chief Investment Officer (CIO) at Apollo Wealth Management, said, "It takes time for interest rate hikes to impact corporate earnings. Now we have started to see that."

The market sentiment, which had rallied the previous day following Fed Chair Jerome Powell's remarks on entering 'disinflation,' shifted. With Fed officials signaling higher interest rates, investors are more cautiously monitoring the monetary policy path.

Fed Governor Christopher Waller warned at a conference that the fight against inflation is not over and could lead to higher rates than expected. He said, "We are beginning to see the fruits of our efforts to lower inflation, but there is still a long way to go," adding, "It could be a long battle with higher rates for longer than some currently expect."

John Williams, President of the New York Federal Reserve Bank, also mentioned the recent easing of financial conditions and stated that interest rates need to remain sufficiently restrictive for several years. He presented a reasonable view that the year-end rate forecast should be around 5 to 5.5%, indicating an additional 0.5 percentage point increase from the current level. Neel Kashkari, President of the Minneapolis Fed, previously argued that the January employment report confirmed the need for the Fed to actively raise rates.

In the New York bond market, Treasury yields fell. The 10-year U.S. Treasury yield dropped to around 3.62%. The 2-year yield, sensitive to monetary policy, also slightly declined to about 4.3%.

Earlier, Powell's mention of disinflation served as a 'magic word' that reassured the market, but experts analyzed that his comment about inflation still being high in the services sector is fueling concerns about tightening.

The market expects that next week's release of indicators such as the Consumer Price Index (CPI) will clarify the Fed's next moves. Sam Gunter, Head of FX Trading at Britannia Global Markets, said, "It is now clear that the Fed is truly data-dependent. All eyes will be on Tuesday's CPI report next week. Disinflation has started, but not yet in the services sector." Peter Garnry, Head of Equity Strategy at Saxo Bank, assessed that "Powell's remarks indicating that the services sector will exert upward inflationary pressure longer than expected pose a risk."

Oil prices rose on demand expectations. At the New York Mercantile Exchange, March delivery West Texas Intermediate (WTI) crude oil closed at $78.47 per barrel, up $1.33 (1.72%) from the previous session. This closing price is the highest since January 31.