Major indices on the U.S. New York Stock Exchange showed mixed movements in early trading on the 22nd (local time) as they digested earnings reports from major companies such as Macy's and news of credit rating downgrades for U.S. banks the previous day. This week also features the earnings report of Nvidia, the leader of the artificial intelligence (AI) rally, and the economic symposium "Jackson Hole Meeting," where Federal Reserve (Fed) Chair Jerome Powell is scheduled to speak.
At around 10:24 a.m. on the New York Stock Exchange (NYSE), the Dow Jones Industrial Average, composed of blue-chip stocks, was down 84.85 points (0.25%) from the previous close, trading near the 34,378 level. Meanwhile, the large-cap-focused S&P 500 index rose 4.29 points (0.1%) to around 4,404, and the tech-heavy Nasdaq index gained 41.33 points (0.31%) to about 13,538.
Currently, within the S&P 500, stocks related to communication, technology, and discretionary consumer goods are rising, while those in staples and financial sectors are declining. Following the credit rating downgrade of five U.S. banks by international credit rating agency S&P the previous day, bank stocks are showing weakness. Major large banks such as JPMorgan, Bank of America, and Citigroup are also experiencing declines in the 1% range. Nvidia, which surged sharply the day before ahead of its earnings report, is trading nearly 2% lower. Tesla rose more than 1%. Fabrinet soared about 27% after reporting quarterly earnings that exceeded Wall Street expectations. Dick's Sporting Goods fell nearly 24% after reporting weak results and annual guidance due to increased retail theft. Macy's, which released earnings before the market opened, dropped more than 10% due to disappointing future outlooks. Charles Schwab, which announced layoffs and office closures, is down more than 2%.
Investors are closely watching the final phase of corporate earnings reports, the impact of U.S. bank credit rating downgrades, and recent sharp movements in Treasury yields while awaiting major events scheduled for this week. With S&P downgrading the credit ratings of five U.S. banks the previous day, market caution toward the banking sector has been reaffirmed. The banks downgraded this time include Associated Banc-Corp, Valley National Bancorp, UMB Financial Corp, Comerica Bank, and KeyCorp. S&P also lowered the outlook to 'negative' for S&T Bank and River City Bank due to commercial real estate exposure risks. This comes about two weeks after Moody's downgraded the ratings of 10 regional banks.
Corporate earnings released before the market open were mixed. Macy's beat expectations for Q2 earnings but saw a decline in sales compared to last year, raising concerns about future performance. Lowe's sales fell short of estimates, but earnings per share exceeded forecasts. Investor attention is focused on Nvidia's earnings report after the market close the next day. Most Wall Street analysts currently expect Nvidia's Q2 earnings, to be announced after the close on the 23rd, to surpass market expectations and foresee further gains in Nvidia's stock price.
From the 24th to the 26th, the economic symposium "Jackson Hole Meeting" will be held in Wyoming, U.S. It is a gathering attended by central bank governors and senior officials from various countries, including Fed Chair Jerome Powell and European Central Bank (ECB) President Christine Lagarde, as well as prominent economists. Notably, Chair Powell is scheduled to deliver an economic outlook speech at 10:05 a.m. Eastern Time on the second day, the 25th. He is expected to reaffirm a data-dependent stance and leave open the possibility of further interest rate hikes if necessary.
In the New York bond market on the day, the 10-year U.S. Treasury yield was trading around 4.34%. The benchmark 10-year yield has been rising recently due to expectations of a soft landing, concerns over prolonged Fed tightening, and increased Treasury issuance by the U.S. Treasury Department. The 2-year Treasury yield, which is sensitive to monetary policy, has surpassed the 5% level. The dollar index, which measures the value of the U.S. dollar against six major currencies, rose more than 0.3% to about 103.6.
Megan Hohmann, Chief Investment Officer at Verdence Capital Advisors, told CNBC, "Generally, a sharp rise in Treasury yields exposes other vulnerable areas," adding, "There is risk in tech stocks and high price-to-earnings growth stocks. Further declines in the stock market are expected." Richard Hunter of Interactive Investor said, "The fight against inflation is not over yet," and predicted, "Whatever the outlook in Chair Powell's speech, it could be the next decisive test for the market."
European stock markets are on the rise. Germany's DAX index is trading about 0.6% higher than the previous close. The UK's FTSE index is up 0.18%, and France's CAC index has gained 0.5%.
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