[New York Stock Market] Nvidia Falls Nearly 5%... Nasdaq Down 0.25% Amid Rising Treasury Yields

The three major indices of the U.S. New York stock market closed mixed near the flat line on the 17th (local time), amid rising Treasury yields following stronger-than-expected retail sales data.

At the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 33,997.65, up 13.11 points (0.04%) from the previous session. The large-cap S&P 500 index fell 0.43 points (0.01%) to 4,373.20, while the tech-heavy Nasdaq index dropped 34.24 points (0.25%) to 13,533.75.

Within the S&P 500, technology, real estate, and utilities sectors declined, while materials, energy, and financial sectors rose. The U.S. government additionally banned exports of low-end artificial intelligence (AI) chips to China, causing semiconductor-related stocks to weaken. Leading AI semiconductor stock Nvidia fell nearly 5% from the previous close. Broadcom dropped 2.01%, Intel 1.37%, and AMD 1.24%. Electric vehicle company Lucid fell more than 5% after its third-quarter vehicle delivery results significantly missed market expectations. On the other hand, Dollar Tree rose more than 4% after Goldman Sachs upgraded its investment rating. Bank of America (BoA) gained over 2% on better-than-expected earnings. Lockheed Martin also closed slightly higher after exceeding quarterly consensus.

[Image source=AFP Yonhap News]

Investors focused on retail sales, Treasury yield movements, corporate third-quarter earnings reports, and additional U.S. semiconductor export controls on China. The U.S. September retail sales, released before the market opened, exceeded expectations. According to the U.S. Department of Commerce, September retail sales reached $704.9 billion, up 0.7% month-over-month, surpassing the expert forecast of 0.2%. Contrary to market expectations of slowing U.S. consumption due to accumulated tightening, depletion of excess savings, and the start of student loan repayments, consumption remained robust.

The stronger-than-expected retail sales immediately raised concerns about tightening, leading to a rise in Treasury yields. In the New York bond market, the 10-year yield surpassed 4.8% again. The 30-year yield stood around 4.92%, and the 2-year yield, sensitive to monetary policy, rose to about 5.22%.

Alex McGrath, Chief Investment Officer at NorthEnd Private Wealth, said, "Retail sales exceeded expectations, pushing Treasury yields to levels that are problematic for the market," adding, "The retail sales report continues to burden investors trying to digest neutral Fed comments." The rise in Treasury yields is directly pressuring the stock market. Chris Zaccagnini, Chief Investment Officer (CIO) at Independent Advisor Alliance, evaluated that "the bond market is leading the stock market."

The U.S. government's additional ban on low-end AI chip exports to China also worsened investor sentiment, especially in technology stocks. The export control measures on semiconductors to China, announced by the Department of Commerce, added performance density criteria for AI chips. As a result, Nvidia's low-end AI chips, A800 and H800, are now subject to export controls. Furthermore, the Department of Commerce extended export controls to overseas subsidiaries of Chinese headquarters and countries under weapons embargo, blocking China’s attempts to circumvent existing sanctions.

Geopolitical risks from the Middle East continue. Amid expectations of an imminent ground troop deployment in Gaza by Israel, the Palestinian militant group Hamas stated, "We are not afraid of the occupier's (Israel's) threat to launch a ground attack. We are prepared." Iran's Supreme Leader Ayatollah Seyed Ali Khamenei also issued strong remarks against Israel, saying, "We must respond to what is happening in Gaza." However, U.S. President Joe Biden’s announcement of a surprise visit to Israel and other Middle Eastern countries on the 18th has led to speculation that Israel’s ground offensive may be delayed. Currently, the U.S. and the international community are engaged in intense diplomatic efforts to prevent a full-scale war. On the same day, news emerged that Ayman Nofal, one of Hamas’s top commanders, was killed in an Israeli airstrike.

Meanwhile, corporate third-quarter earnings are helping to ease market concerns. The third-quarter results of BoA and BNY Mellon, released on the day, exceeded expectations. Johnson & Johnson raised its annual guidance. Lockheed Martin also forecasted increased sales for the year. According to FactSet, the net earnings of companies listed on the S&P 500 are estimated to increase by 0.4% compared to the same period last year, marking the first positive growth since Q3 2022. Mark Heffel, CIO of UBS Global Wealth Management, expressed optimism in an investor memo, stating, "The earnings recession is over."

The U.S. dollar traded near flat. The Dollar Index, which shows the dollar’s value against six major currencies, remained around 106.2, similar to the previous session. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street’s "fear gauge," jumped over 3% to 17.8. Marco Kolanovic, strategist at JPMorgan, said, "Our outlook remains cautious as long as interest rates are restrictive and geopolitical risks persist," recommending investors to invest in gold and reduce equity exposure.

International crude oil prices also remained steady, watching the Middle East situation including President Biden’s visit to Israel. On the New York Mercantile Exchange, November delivery West Texas Intermediate (WTI) crude oil closed at $86.66 per barrel, unchanged from the previous day.