The three major indices of the U.S. New York stock market showed mixed movements near the opening on the 18th (local time), as investors monitored corporate second-quarter earnings reports and retail sales data.
At around 10:12 a.m. at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 211.14 points (0.61%) from the previous close to the 34,796 level. The S&P 500 index, which is centered on large-cap stocks, increased by 8.31 points (0.18%) to 4,531. Meanwhile, the tech-heavy Nasdaq index fell 34.12 points (0.24%) to 14,210.
Currently, all sectors of the S&P 500 except technology, real estate, and consumer discretionary stocks are rising. Notably, the energy sector's rally stood out. Financial stocks also jumped nearly 1%. Bank of America (BoA) and Morgan Stanley, which reported better-than-expected earnings before the market opened, rose 4.10% and 5.99%, respectively. New York Mellon Bank also climbed more than 2% on strong earnings. Pinterest rose nearly 4% after Evercore ISI raised its target price. On the other hand, Tesla showed a decline of around 1% ahead of its earnings announcement the following day.
Investors focused on the second-quarter earnings season, which began in earnest last week with announcements from major banks, as well as key indicators including retail sales. Last week, inflation indicators such as the Consumer Price Index (CPI) showed a clear easing trend, reducing concerns about Federal Reserve (Fed) tightening, and investors' attention shifted to corporate earnings. The major banks that released earnings before the market opened posted results exceeding expectations. BoA's net income rose 19% year-on-year to $7.4 billion. Although Morgan Stanley's net income declined by double digits, its earnings per share of $1.24 surpassed the forecast of $1.15.
This week, earnings reports from big tech companies attracting investor attention, such as Tesla and Netflix, are scheduled. Despite expectations that the net income of S&P 500-listed companies will decline by more than 7% year-on-year in the second quarter due to cost pressures, the early earnings season atmosphere has been positive. According to FactSet, 84% of S&P 500 companies that have reported so far have beaten estimates.
U.S. retail sales released today continued to increase for the third consecutive month but fell short of market expectations. According to the U.S. Department of Commerce, retail sales in June rose 0.2% month-on-month, marking a three-month increase. However, this was below the expert forecast (+0.5%) compiled by The Wall Street Journal (WSJ) and less than the increase in May. The May increase was revised upward from 0.3% to 0.5%. Meanwhile, core retail sales excluding gasoline and automobiles rose 0.3%, matching Bloomberg's forecast.
Retail sales are considered a pillar accounting for two-thirds of the U.S. real economy and a comprehensive indicator of economic health. This data was released amid a clear easing trend in inflation indicators such as the CPI, a retreat in Fed tightening concerns, and rising expectations for a so-called 'soft landing.' According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) futures market expects the Fed to implement a baby step (a 0.25 percentage point rate hike) at the upcoming July FOMC meeting and then hold rates steady in September.
The market is divided between interpretations that the U.S. economy is showing gradual signs of slowing and analyses that strong consumer spending continues to support the economy. Oren Klatchkin, an economist at Oxford Economics, said in an investor memo today that "June retail sales suggest consumers are becoming more cautious in their purchases." Robert Fredrick, a corporate economist at Navy Federal Credit Union, also analyzed that "(the retail spending data) is positive but weaker than expected, showing that consumers are being more careful with their purchases."
On the other hand, considering the cumulative effects of tightening, some assessments still regard U.S. consumer spending as solid. CNN reported that "U.S. consumers are still opening their wallets despite high interest rates, stubborn inflation, and ongoing economic uncertainty," but added, "Whether that momentum will continue after summer remains to be seen." Earlier, Jamie Dimon, CEO of JPMorgan Chase, assessed the U.S. consumer situation during the earnings announcement on the 14th, stating that "consumers are in good shape" and "are spending cash in excess."
On Wall Street, there is speculation that if the Fed's 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 due to inflation that did not fall as expected and an overheated labor market. Fed officials have entered a blackout period ahead of the July 25-26 Federal Open Market Committee (FOMC) meeting, refraining from public comments on the matter.
In the New York bond market today, Treasury yields are declining. The yield on the 10-year U.S. Treasury is around 3.76%, and the 2-year Treasury, which is sensitive to monetary policy, is around 4.70%. The dollar index, which shows the value of the dollar against the currencies of six major countries, is steady at 99.91.
European stock markets are showing gains near the flat line. Germany's DAX index is trading up 0.11%. The UK's FTSE index rose 0.38%. France's CAC index is up 0.17%.
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