[New York Stock Market] US Micron Cheers Samsung Electronics' Production Cut... Surges Over 8%

The three major indices of the U.S. New York stock market closed mixed near the flat line on Monday, the 10th (local time), amid renewed concerns about an economic recession. This week, investors are cautiously awaiting a slew of events, including inflation indicators such as the Consumer Price Index (CPI) that could influence the Federal Reserve's (Fed) interest rate decisions, earnings reports mainly from major banks, and economic outlook announcements from the International Monetary Fund (IMF) and the World Bank (WB).

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 101.23 points (0.3%) from the previous close to finish at 33,586.52. The S&P 500, which focuses on large-cap stocks, increased by 4.09 points (0.1%) to 4,109.11. In contrast, the tech-heavy Nasdaq index fell 3.6 points (0.03%) to close at 12,084.35.

Within the S&P 500, stocks related to communications, technology, utilities, healthcare, and consumer staples declined, while those in industrials, energy, real estate, materials, consumer discretionary, and financials rose. By sector, Apple closed down 1.6% after an IDC report indicated that Mac shipments sharply declined compared to competitors. Alphabet fell 1.83%, and Microsoft dropped 0.76%. Meanwhile, Micron Technology rose more than 8% following news that Samsung Electronics is expected to cut memory semiconductor production soon. Pioneer Natural Resources jumped 5.79% on reports that ExxonMobil held informal talks about acquiring the company.

[Image source=Reuters Yonhap News]

Investors returning from the Easter holiday are digesting last Friday's employment report amid renewed recession fears, while also awaiting key economic indicators, corporate earnings, the March Federal Open Market Committee (FOMC) minutes, and speeches from Fed officials scheduled for this week. According to the employment report released on the holiday, April 7, nonfarm payrolls increased by 236,000 in March, falling short of market expectations. This has led to assessments that the labor market is slowing, further fueling recession concerns.

Investors are now closely watching the March CPI release scheduled for the 12th. The March CPI is expected to rise 5.1% year-over-year, down from 6% in the previous month, entering the 5% range. If inflation exceeds market expectations, concerns about Fed tightening will inevitably intensify. The market remains particularly focused on sticky core inflation. With service prices continuing to rise strongly, core CPI is likely to outpace headline CPI. The New York Federal Reserve's survey released on the same day showed that expected inflation over the next year (March) rose to 4.7%, up from 4.2% the previous month.

The market is leaning toward a Fed baby step (a 0.25 percentage point rate hike). According to the Chicago Mercantile Exchange (CME) FedWatch tool, federal funds futures currently price in more than a 71% chance that the Fed will implement a baby step in May. Conversely, the probability of a rate pause has dropped from the 42% range a week ago to the 28% range.

The March FOMC minutes will also be released on the 12th. Attention will focus on the rationale behind the Fed's decision to raise the benchmark interest rate by 0.25 percentage points despite the banking sector crisis triggered by the Silicon Valley Bank (SVB) collapse, as well as the Fed's economic assessment. This week, Fed officials including Austin Goolsbee (President of the Federal Reserve Bank of Chicago), Patrick Harker (Philadelphia Fed President), Neel Kashkari (Minneapolis Fed President), Thomas Barkin (Richmond Fed President), and Mary Daly (San Francisco Fed President) are scheduled to deliver speeches.

Additionally, the earnings season will kick off in earnest later this week, centered on major banks such as JPMorgan Chase, Citi, and Wells Fargo. As this is the first quarterly earnings report following the SVB incident, key issues include the impact of small and mid-sized bank failures on the banking sector as a whole, and what messages management will convey regarding future lending regulations and credit tightening. This will affect not only the growth outlook across industries but also the Fed's future interest rate hike trajectory. According to FactSet, the net earnings of S&P 500-listed companies for the first quarter of this year are estimated to decline by 6.8% year-over-year. If this materializes, it will mark two consecutive quarters of negative growth following the fourth quarter of last year.

Furthermore, at the IMF and WB meetings held in Washington, D.C., finance ministers and central bank heads from major countries worldwide are expected to discuss economic growth and inflation. David Malpass, President of the World Bank, announced that the global economic growth forecast for this year has been raised from 1.7% to 2.0%. This adjustment is attributed to China's transition to a "with-COVID" policy and reopening, as well as better-than-expected performance in advanced economies. The IMF will also release its global economic growth and financial stability reports on the 11th.

Greg Basak of AXS Investment said, "Uncertainty surrounding mixed economic data is fueling uncertainty about Fed policy, and we are seeing concerns about the possibility of another rate hike. Investors appear to be increasingly worried about the potential for a U.S. recession and are under greater pressure as the Fed's decision approaches." Travis McCourt of Raymond James stated, "Some slowdown is needed to lower inflation expectations, but a Goldilocks scenario?not too hot, not too cold?is necessary to avoid triggering fears of a hard landing."

In the New York bond market on the day, Treasury yields rose slightly as investors awaited inflation data. The 10-year U.S. Treasury yield hovered around 3.42%, and the 2-year yield was near 4.0%. The dollar index, which measures the value of the U.S. dollar against six major currencies, moved above 102.5, up more than 0.4% from the previous close.

Oil prices declined due to profit-taking. On the New York Mercantile Exchange, May delivery West Texas Intermediate (WTI) crude oil closed at $79.74 per barrel, down 96 cents (1.19%) from the previous day. This closing price was the lowest since March 31.