The major indices of the U.S. New York stock market are showing mixed movements around the flat line in early trading on the 16th (local time) as investors await the release of the July Federal Open Market Committee (FOMC) minutes.
At around 10:03 a.m. at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average, composed of blue-chip stocks, was trading at around 35,044, up 97.69 points (0.28%) from the previous close. The S&P 500 index, which focuses on large-cap stocks, was up 0.61 points (0.01%) at 4,348. Meanwhile, the tech-heavy Nasdaq index was down 41.681 points (0.31%) at 13,589.
Currently, within the S&P 500, energy and consumer staples stocks are rising, while real estate and telecommunications stocks are falling. Major large banks are showing weakness following Fitch’s warning that dozens of banks, including JPMorgan Chase, could face credit rating downgrades. Bank of America (BoA) fell 1.45%, and Wells Fargo dropped 0.83%. JPMorgan, Citi, and Goldman Sachs are also trading slightly lower. Major energy stocks rebounded, with Chevron rising more than 1%. Additionally, Target, which released earnings today, is up more than 5% on the back of quarterly net income exceeding expectations. Coinbase rose over 2% after securing cryptocurrency futures trading qualifications from regulators. Tesla showed a slight decline after announcing price cuts for Model X and Model S in China.
Investors are closely watching concerns over defaults in the Chinese real estate sector, the impact of Fitch’s warning on U.S. banks from the previous day, and economic data releases, while awaiting the July FOMC minutes to be released this afternoon. Investors are expected to look for indications on the direction of interest rates and changes in economic outlook after the September meeting through these minutes. Ian Lingen, Head of U.S. Interest Rate Strategy at BMO Capital Markets, said in an investor memo that "the FOMC minutes will shed light on how officials view the regional banking crisis last spring and the delayed effects of tightening policies," adding that "additional discussions on the balance sheet will also be an important aspect to watch."
Anna Wong, an economist at Bloomberg Economics, pointed out that Fed Chair Jerome Powell’s post-July FOMC press conference, which left open the possibility of both rate hikes and pauses, was interpreted as dovish, and predicted that "the Fed may adopt a dovish stance in future monetary policy." Although the July FOMC minutes to be released today are expected to show only a minority of opinions favoring a pause, subsequent economic data releases are believed to have shifted the internal sentiment of the FOMC more dovishly.
The market currently favors a rate pause in September. According to the CME FedWatch tool, federal funds futures markets are pricing in an over 88% chance that the Fed will hold rates steady in September. The market expects rate cuts could begin as early as March next year. However, the July U.S. retail sales data released the previous day showed a stronger-than-expected increase, raising hopes for a soft landing but also concerns that Fed tightening could be prolonged.
The U.S. housing starts for July, released today, rose 3.9% month-over-month to 1.452 million units, in line with Wall Street expectations. New building permits, a leading indicator of housing market trends, increased 0.1% month-over-month to 1.442 million units. Industrial production in July returned to growth after three months, rising 1.0% month-over-month, exceeding market expectations of +0.3%.
Corporate earnings announcements continue. Following Target today, Walmart and Ross Stores will report earnings tomorrow. Walmart had raised its sales forecast earlier this year in May, supported by strong grocery and e-commerce businesses. There are expectations that Walmart could post an earnings surprise exceeding estimates.
Economic news from China is weighing on investor sentiment. Previously released data on China’s July retail sales and industrial production were worse than expected. Additionally, the People’s Bank of China’s surprise policy rate cut has heightened concerns surrounding the Chinese real estate crisis. Major foreign media are also wary of liquidity issues not only at China’s largest real estate developer, Biguiyuan, which is facing default risk, but also at Zhongling International Trust. With sluggish domestic demand and default concerns among large real estate companies piling up, some forecasts suggest China’s economic growth rate this year may remain in the 4% range.
In the New York bond market today, Treasury yields slightly declined as investors awaited the FOMC minutes. The benchmark 10-year U.S. Treasury yield is trading in the 4.20% range, while the 2-year yield, which is sensitive to monetary policy, is around 4.92%. The Dollar Index, which measures the value of the dollar against six major currencies, is steady around 103.2.
European stock markets are also mixed. Germany’s DAX index is trading slightly higher. Meanwhile, the UK’s FTSE index is down 0.6%, and France’s CAC index has fallen 0.13%.
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