New York Stock Market Shows Mixed Early Trading as Tesla and Netflix Digest Earnings Results

The three major indices of the U.S. New York stock market showed mixed trends in the early session on the 20th (local time) as they digested the second-quarter earnings of major companies such as Tesla and Netflix. The Dow Jones Industrial Average, composed of blue-chip stocks, continued its nine-day consecutive rise.

At around 10:10 a.m. at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average was trading at around 35,242 points, up 180.79 points (0.52%) from the previous close. Meanwhile, the large-cap-focused S&P 500 index was down 13.39 points (0.29%) at 4,552, and the tech-heavy Nasdaq index was down 133.19 points (0.93%) at 14,224.

Currently, within the S&P 500, stocks related to real estate, technology, telecommunications, and consumer discretionary sectors are declining, while healthcare, energy, utilities, and financial sectors are on the rise. Netflix, which released its earnings after the previous day's close, is down nearly 8% despite subscriber growth in the second quarter, as its revenue fell short of Wall Street estimates. Tesla's second-quarter revenue exceeded market expectations, but margins shrank due to price cuts, and following the management's announcement of a factory shutdown to improve operations that will slow production in the third quarter, its stock is currently down more than 6%.

Johnson & Johnson rose nearly 5% after raising its annual guidance with better-than-expected earnings per share and revenue. Veru Biotech slid more than 40% after announcing that its influenza vaccine failed to meet targets in Phase 2 trials. Following disappointing earnings from Taiwan's TSMC, major semiconductor stocks such as Nvidia, Intel, and AMD also declined across the New York stock market.

[Image source=Reuters Yonhap News]

Investors are closely watching the earnings reports of major companies and economic indicators to find clues about the future economic outlook. Last week, inflation indicators such as the Consumer Price Index (CPI) showed a clear easing trend, which reduced concerns about Federal Reserve (Fed) tightening, shifting investors' focus to corporate earnings.

While the net profits of S&P 500-listed companies are expected to decline by more than 7% year-on-year in the second quarter of this year, the early earnings season atmosphere has been smooth so far. According to FactSet, 74% of S&P 500 companies that have reported earnings so far have exceeded expectations. These earnings reports further strengthen the optimistic view of a soft landing that can reduce inflation without a recession. Tom Lee, Chief Research Officer at Vanguard, said, "Investors are clearly and loudly saying they expect the current stock market rally to continue."

John Gray, Chief Operating Officer of Blackstone, appeared on CNBC's Squawk Box and diagnosed that inflation concerns that have weighed on the U.S. for the past two years are easing. He said, "The Fed will not ease its vigilance considering the experience of the 1970s, which will lead to a slowdown in the U.S. and global economies," but emphasized, "The good news is that we have overcome the inflation shock." He added, "We will have to deal with a slight recession, but we will overcome that as well."

Fed officials have entered a blackout period ahead of the July Federal Open Market Committee (FOMC) regular meeting scheduled for the 25th-26th, refraining from public comments. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) futures market currently sees the possibility of a rate hold in September as the most likely scenario following a baby step rate hike in July.

The manufacturing indicator released on the day was weak. The Philadelphia Federal Reserve Bank's manufacturing index was -13.5, indicating contraction. This index shows expansion or contraction based on zero.

On the same day, weekly initial jobless claims fell, contrary to market expectations, suggesting that the U.S. labor market remains robust. Last week's claims decreased by 9,000 from the previous week to 228,000. Wall Street consensus had expected an increase of 3,000.

In the New York bond market, Treasury yields are rising. The yield on the U.S. 10-year Treasury note is around 3.84%, and the 2-year Treasury note, sensitive to monetary policy, is around 4.86%. The dollar index, which shows the value of the dollar against the currencies of six major countries, rose more than 0.3% from the previous close to 100.6.

Meanwhile, tensions have increased due to Russia's suspension of the Black Sea grain deal, causing sharp rises in prices of agricultural products such as wheat. On the same day, the Central Bank of T?rkiye raised its benchmark interest rate by 2.5 percentage points to 17.5% due to inflation concerns. South Africa kept its rate unchanged at 8.25%.