New York Stock Market Rises Early Amid Focus on Corporate Earnings

The three major indices of the U.S. New York stock market showed an early upward trend on Monday, the 16th (local time), as investors awaited this week's scheduled corporate quarterly earnings announcements and remarks from Federal Reserve (Fed) Chair Jerome Powell and other officials.

At around 10 a.m. at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average, which focuses on blue-chip stocks, was trading at around 33,896, up 225.79 points (0.67%) from the previous close. The large-cap S&P 500 index rose 27.80 points (0.64%) to around 4,355, while the tech-heavy Nasdaq index gained 92.84 points (0.69%) to reach about 13,500.

All 11 sectors of the S&P 500 were in positive territory. Technology, communication, industrials, materials, financials, and consumer discretionary stocks rose more than 1%. Charles Schwab surged over 6% following better-than-expected earnings per share and a slowdown in bank deposit outflows. Lululemon jumped nearly 10% ahead of its inclusion in the S&P 500. Pharmacy chain Rite Aid's stock plunged and trading was halted due to its bankruptcy filing. Moderna and BioNTech fell about 7% and 5%, respectively, amid concerns over declining demand for COVID-19 treatments and vaccines. In contrast, Pfizer rose after Jefferies upgraded its investment rating despite the company lowering its annual sales targets due to reduced demand. Manchester United dropped nearly 11% following reports of negotiations with British billionaire Jim Ratcliffe.

[Image source=AFP Yonhap News]

Investors are awaiting third-quarter earnings reports scheduled for this week, following strong results last week from JP Morgan and Wells Fargo. In the banking sector, earnings announcements are expected not only from major banks such as Goldman Sachs, Morgan Stanley, and Bank of America (BoA) but also from regional banks like M&T Bank and Citizens Financial. Other companies reporting earnings include Johnson & Johnson, Lockheed Martin, United Airlines, Las Vegas Sands, Tesla, Netflix, and American Airlines. According to FactSet, the net earnings of companies listed on the S&P 500 for the third quarter are estimated to increase by 0.4% compared to the same period last year, marking the first positive growth since the third quarter of 2022.

In the New York bond market, Treasury yields are on the rise. The benchmark 10-year U.S. Treasury yield is hovering around 4.7%. The 2-year yield, which is sensitive to monetary policy, also edged up slightly to about 5.08%. However, geopolitical risks persist due to the ongoing war between Israel and Hamas, with concerns about escalation involving Iran and Hezbollah. If the conflict intensifies, there could be increased pressure for Treasury yields to fall as investors flock to safe-haven assets.

Earlier this morning, reports emerged that Hamas fired missiles at Tel Aviv and Jerusalem in Israel. Amid rapidly evolving developments, U.S. President Joe Biden's unusual cancellation of his trip to Colorado on the same day has sparked speculation about a possible visit to Israel. Since Hamas's attack on Israel on October 7, at least 1,400 people have died in Israel and 2,670 in the Gaza Strip.

This week, numerous Fed officials, including Chair Powell, are scheduled to speak. These include John Williams, President of the New York Federal Reserve Bank and considered the Fed's third-ranking official; Thomas Barkin, President of the Richmond Fed; Neel Kashkari, President of the Minneapolis Fed; Austan Goolsbee, President of the Chicago Fed; Governors Christopher Waller and Lisa Cook; and Vice Chair Philip Jefferson. Investors are expected to seek hints about the direction of interest rates from these remarks ahead of the blackout period when public comments are prohibited. Recently, some officials have suggested that the rapid rise in Treasury yields has reduced the need for further tightening, leading to a dovish interpretation.

Azai Radahaksha of Barclays noted in an investor memo that "bond market volatility and tensions in the Middle East are weighing on risk assets," but added that "corporate earnings and dovish Fed comments should offset this."

The market still largely expects the Fed to hold rates steady in November. According to the Chicago Mercantile Exchange's (CME) FedWatch tool, federal funds futures this morning price in over a 90% probability that the Fed will keep rates unchanged in November. The likelihood of a hold at the final FOMC meeting of the year in December stands at around 67%. Previously, the Fed had maintained rates at 5.25-5.5% at the September FOMC meeting as expected, while signaling one more rate hike before year-end.

Additionally, key economic indicators such as September retail sales and industrial production will be released on the 17th. On the 18th, the Fed's Beige Book, a report on economic conditions, will be published. The New York Fed's October manufacturing index for New York State, released today, fell 6.5 points to -4.6 from the previous month, with a negative reading indicating contraction in business activity.

European stock markets are rising within a narrow range. Germany's DAX and the UK's FTSE indices are both up about 0.5%, while France's CAC index has gained 0.6%.