[New York Stock Market] Closes Higher Ahead of Corporate Earnings... Dow Hits Year-to-Date High

The three major indices of the U.S. New York Stock Exchange all closed higher on Monday, the 17th (local time), as investors closely watched corporate earnings reports for the second quarter. The Dow Jones Industrial Average, composed of blue-chip stocks, rose for the sixth consecutive trading day, reaching a year-to-date high.

On the day at the New York Stock Exchange (NYSE), the Dow closed at 34,585.35, up 76.32 points (0.22%) from the previous session. The large-cap S&P 500 index rose 17.37 points (0.39%) to 4,522.79, while the tech-heavy Nasdaq index gained 131.24 points (0.93%) to close at 14,244.95.

Within the S&P 500, technology, financial, and industrial stocks rose, while utilities, real estate, and healthcare stocks declined. Tesla announced over the past weekend that it produced its first Cybertruck at its Gigafactory in Texas, leading to a 3.20% increase from the previous close. Game company Activision Blizzard rose more than 3% following news that Microsoft (MS), which is pursuing an acquisition, signed a deal with Sony to allow Activision’s popular game 'Call of Duty' to be played on PlayStation. This agreement also signifies Sony’s approval, which had previously opposed the acquisition due to monopoly concerns. Consequently, there is growing expectation that the UK regulatory authority, which had earlier rejected the deal, may reverse its decision to approve it.

Yelp surged more than 10% after Goldman Sachs upgraded its investment rating and raised its target price. Paramount Global fell over 3% as the latest installment of the 'Mission: Impossible' film series showed disappointing early box office results. Ford Motor Company dropped nearly 6% after Tesla’s Cybertruck production announcement, as Ford cut the price of its electric pickup model, the F-150 Lightning, by nearly 17%.

[Image source=Reuters Yonhap News]

Investors showed caution as they awaited the second-quarter earnings season, which kicked off late last week with announcements from major banks, along with key indicators such as retail sales. Inflation indicators like the Consumer Price Index (CPI) showed clear easing trends last week, reducing concerns about Federal Reserve (Fed) tightening. As a result, investors’ focus shifted to corporate earnings. Danny Huson of AJ Bell told MarketWatch, "The New York stock market showed a rally in the first half of the year," adding, "To maintain this momentum, companies will need to avoid crises." He explained that even if earnings are strong, if annual guidance falls short of market expectations, it could immediately exert downward pressure on the New York stock market.

This week, earnings reports from big tech companies such as Tesla and Netflix, which attract significant investor attention, are scheduled. However, outlooks are not favorable due to cost pressures. According to FactSet, net profits of S&P 500-listed companies for the second quarter are estimated to decline by more than 7% year-over-year. Bloomberg Intelligence forecasts a 9% decrease. As of the previous day, 5% of S&P 500 companies had reported earnings, with average profits estimated to have fallen by 9.3%. Bill Callahan, an investment strategist at Schroders, said, "Investors will focus on second-quarter earnings," adding, "The key question is how the big tech companies, which have led the market, will guide the market and themselves for the remainder of the year."

Among financial firms, Morgan Stanley, Bank of America (BoA), Goldman Sachs, and American Express are scheduled to release earnings this week. Major financial firms such as JPMorgan Chase and Wells Fargo, which kicked off the earnings season last week with earnings surprises, have drawn attention to whether this trend will continue. These strong financial results indicate that U.S. consumers and businesses continued borrowing and spending in the second quarter, which, along with recent easing inflation trends, contributes to expectations for a soft landing of the economy. On this day, Goldman Sachs lowered its recession forecast from 25% to 20%. JPMorgan strategist Marco Kolanovic also assessed that the short-term risk of recession is low.

Additionally, regional banks such as Western Alliance, Citizens Financial, M&T Bank, U.S. Bancorp, and Zions Bancorporation will continue to report earnings. Since the strong performance of major banks is seen as a reflection of benefits gained amid concerns about small and regional banks following the Silicon Valley Bank (SVB) collapse this spring, some analysts suggest that regional bank risks could resurface following these earnings announcements.

Among key economic indicators, U.S. retail sales are scheduled for release on the 18th. Other real estate and economic indicators such as the housing price index, new housing starts, existing home sales, and leading economic indicators will also be announced. If retail sales exceed expectations with solid results, expectations for a soft landing of the U.S. economy are likely to increase further. Retail sales are considered a pillar accounting for two-thirds of the U.S. real economy and a comprehensive measure of economic health.

On Wall Street, there is speculation that if the Fed’s interest rate hikes are limited to one more time this year as investors expect, the possibility of a rally in the New York stock market could increase. Previously, the Fed had indicated two baby steps (0.25 percentage point rate hikes) this year, citing inflation that has not fallen as much as expected and an overheated labor market. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds (FF) futures market currently sees the highest probability for a baby step rate hike in July followed by a rate hold in September. Fed officials have entered a blackout period ahead of the July 25-26 Federal Open Market Committee (FOMC) meeting, refraining from public comments.

On this day, U.S. Treasury yields declined in the New York bond market. The 10-year U.S. Treasury yield hovered around 3.80%, while the 2-year Treasury yield, sensitive to monetary policy, was around 4.74%. The dollar index, which measures the value of the U.S. dollar against six major currencies, remained steady at 99.85.

Oil prices fell due to weak economic data from China. At the New York Mercantile Exchange, August delivery West Texas Intermediate (WTI) crude oil prices closed at $74.15 per barrel, down $1.27 (1.68%) from the previous session.