[New York Stock Market] Mixed Close Watching Earnings... Nasdaq Down 0.04%

The three major indices of the U.S. New York stock market closed mixed and near flat on the 18th (local time) as investors monitored corporate earnings announcements.

On the New York Stock Exchange (NYSE) that day, the Dow Jones Industrial Average closed at 33,976.63, down 10.55 points (0.03%) from the previous session. The S&P 500, which is centered on large-cap stocks, rose 3.55 points (0.09%) to 4,154.87. The tech-heavy Nasdaq index closed down 4.31 points (0.04%) at 12,153.41.

Among the S&P 500 sectors, seven sectors excluding healthcare, communication, utilities, and real estate showed gains. Goldman Sachs closed down 1.70% after a sharp drop in first-quarter net income. Bank of America (BoA) rose 0.63% on better-than-expected earnings. Johnson & Johnson fell 2.81% despite quarterly results beating Wall Street expectations. Nvidia jumped 2.46% after HSBC raised its buy rating by two notches. Netflix, which released earnings immediately after the market close, rose 0.29% to end the regular session.

[Image source=Reuters Yonhap News]

Investors focused on first-quarter corporate earnings that day. Goldman Sachs, BoA, and Johnson & Johnson announced earnings before the market opened. CNBC reported, "Investors are watching earnings to gain insight into how companies are holding up amid persistent inflation and rising interest rates," adding, "Given the recent bankruptcies of Silicon Valley Bank (SVB) and Signature Bank last month, which shocked the industry, attention is being paid to the financial sector."

While the four major U.S. banks, including BoA, posted earnings surprises despite aggressive tightening and the SVB-driven small bank crisis, investment bank Goldman Sachs took a direct hit with a year-over-year decline in net income. Market analysts suggest that unlike the four major banks with a high proportion of retail banking, Goldman Sachs, which focuses on Wall Street investment banking, did not benefit from the interest rate hike effects or the windfall from deposit outflows at small banks. The contraction in financial markets, including a sharp drop in IPOs, bond issuance, and bond and stock trading, also had an impact.

Netflix is scheduled to release earnings after the market close that day. Tesla is set to announce earnings the following day. According to financial data provider Refinitiv, the total earnings of S&P 500-listed companies for the first quarter of this year are estimated to have decreased by 5.2% compared to the same period last year. This represents the largest decline since the COVID-19 pandemic. Recent indicators such as employment, inflation, and consumption have repeatedly fallen short of market expectations, emphasizing the likelihood of an economic slowdown, making the second-quarter earnings guidance from companies noteworthy. The Fed's Beige Book, a report on economic conditions, will also be released on the 19th.

Ed Moya, senior market analyst at OANDA, said, "Today's mood is about earnings concerns, but the fear of tightening will not disappear soon." According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market currently reflects about an 87% probability that the Fed will take a baby step by raising the benchmark interest rate by 0.25 percentage points in May. The most prevailing view is that rates will then be held steady and cut by 0.5 percentage points in the second half of the year.

In this regard, Raphael Bostic, president of the Federal Reserve Bank of Atlanta, appeared on CNBC and said about the rate hike, "One more move will be enough." This message suggests that the Federal Open Market Committee (FOMC) meeting on May 2-3 will raise rates by 0.25 percentage points and end the tightening cycle. If the Fed holds rates steady after a 0.25 percentage point hike, as Bostic indicated, the U.S. benchmark interest rate will reach 5-5.25%, the highest level since August 2007. This corresponds to the median year-end rate of 5.1% projected by the Fed's dot plot.

Bostic also drew a line regarding the possibility of further hikes or cuts. Not having voting rights at this year's FOMC, he said, "If the data comes out as expected, we can stay at that level for quite a while," adding, "Once we reach that point, for the rest of this year and into 2024, there is nothing to do but monitor the economy." He also dismissed market expectations for rate cuts, saying, "Inflation is still too high to consider it."

James Bullard, president of the Federal Reserve Bank of St. Louis and known as a prominent hawk within the Fed, said in a foreign media interview that a recession is unlikely in the second half of the year and supported further rate hikes. Previously, Bullard had argued that the benchmark rate should be raised to 5.5-5.75% this year.

Housing data released that day was weak. According to the U.S. Department of Commerce, permits for new housing starts in March fell 8.8% month-over-month to 1.413 million units, below the Dow Jones estimate of 1.45 million units. New housing starts decreased by 0.8% to 1.42 million units but slightly exceeded market expectations of 1.4 million units.

A public opinion poll also showed that about 7 out of 10 Americans are pessimistic about the U.S. economy due to persistent inflation, high interest rates, and recession concerns. According to a nationwide economic survey released by CNBC, 69% of respondents expressed negative views about the current and future U.S. economy. This is the highest level since the survey began. Two-thirds of respondents diagnosed that the U.S. economy is heading toward a recession or has already entered the first stage.

In the New York bond market that day, U.S. Treasury yields moved near flat. The 10-year U.S. Treasury yield stood around 3.57%, and the 2-year yield, sensitive to monetary policy, was at 4.21%. The dollar index, which shows the value of the dollar against the currencies of six major countries, was trading at 101.7, down more than 0.3% from the previous session. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's "fear gauge," dropped to the 16 level, the lowest since January 2022.

International oil prices closed near flat. On the New York Mercantile Exchange, the May delivery West Texas Intermediate (WTI) crude oil price closed at $80.86 per barrel, up 3 cents (0.04%) from the previous session.