[New York Stock Market] Mixed Close Amid Monitoring of Treasury Yields... Nasdaq ↑ Ahead of Big Tech Earnings

The three major indices of the U.S. New York stock market closed mixed and near flat on Monday, the 23rd (local time), as investors monitored U.S. Treasury yield movements ahead of earnings reports from major big tech companies. Amid ongoing geopolitical risks stemming from the Middle East, this week is set to feature earnings announcements from key big tech firms including Google Alphabet and Amazon, as well as inflation data closely watched by the Federal Reserve (Fed).

At the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 32,936.41, down 190.87 points (0.58%) from the previous session. The large-cap S&P 500 index fell 7.12 points (0.17%) to 4,217.04. In contrast, the tech-heavy Nasdaq index rose 34.52 points (0.27%) to close at 13,018.33 ahead of major big tech earnings releases.

Within the S&P 500, eight sectors excluding technology, communication, and consumer discretionary stocks all showed declines. Notably, energy stocks dropped by about 1.6%. Oil giant Chevron fell more than 3% after news emerged that it plans to acquire competitor Hess for $171 per share, totaling $53 billion. Walgreens Boots Alliance rose over 3% after JP Morgan upgraded its rating with increased weighting. Apple traded near flat amid a Global Times report that its major partner Foxconn is under investigation in China for tax and land use issues. Alphabet and Microsoft (MS), which are set to report earnings this week, showed slight gains. Spotify also rose over 3% ahead of its earnings release. Nvidia, which plunged last week, rebounded nearly 4%.

[Image source=Reuters Yonhap News]

Investors closely watched Treasury yield movements and the ongoing conflict between Israel and Hamas while awaiting this week’s major big tech earnings and economic data releases. In the New York bond market, the benchmark 10-year U.S. Treasury yield briefly surpassed 5% before the market opened but then declined, currently standing around 4.85%. The 30-year yield is near 5.00%, and the 2-year yield, which is sensitive to monetary policy, is around 5.05%.

The recent sharp rise in Treasury yields is a concern weighing on the stock market. News of the 10-year yield breaking 5% led to a lower open for the New York stock market, which later turned positive as yields fell, before ending mixed. Some analysts expect Treasury yields to continue rising. Tony Dwyer, Chief Market Strategist at Canaccord Genuity, warned, "Higher rates will accelerate the already weakening economic conditions."

This week also features earnings reports from major companies. Investor attention is focused on the performance of leading big tech firms such as Alphabet, Meta Platforms, Amazon, and Microsoft. These big tech companies, which have driven the New York stock market in the first half of the year, will be closely watched to see if their earnings can revive investor sentiment dampened by the recent surge in Treasury yields and the war between Israel and the Palestinian militant group Hamas. However, if earnings or guidance fall short of expectations, it could negatively impact stock prices. Tesla’s stock, which missed earnings estimates last week, plunged amid investor disappointment.

According to Bank of America (BoA), about 40% of companies listed on the S&P 500 will report earnings this week. Besides big tech, earnings announcements are expected from General Motors (GM), Coca-Cola, Boeing, IBM, and Merck. BoA strategist Savita Subramanian noted, "The third-quarter earnings season has so far outperformed previous quarters, but guidance is lagging."

The Chicago Federal Reserve Bank’s National Activity Index for September, released on the day, turned positive at 0.02, indicating growth above the long-term average.

Investors are also monitoring geopolitical risks from the Middle East. Hamas released two additional elderly Israeli hostages and relief supplies continued to enter the Gaza Strip, somewhat easing tensions. Earlier, major foreign media reported that the U.S. was discouraging Israel from launching a ground offensive to facilitate further hostage releases. U.S. President Joe Biden told reporters at the White House that regarding a possible temporary ceasefire between Israel and Hamas, "The hostages must be released. Then we can talk."

This week will also see Federal Reserve Chair Jerome Powell’s keynote speech in Washington, D.C., the release of U.S. third-quarter gross domestic product (GDP) growth figures, and the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index. The September PCE price index is expected to rise 0.4% month-over-month. Third-quarter economic growth is forecast to reach an annualized rate in the 4% range, a significant rebound compared to the low 2% growth rates in the first and second quarters. Bloomberg’s consensus estimate for third-quarter GDP is 4.3%.

Morgan Stanley’s Mike Wilson predicted increased market volatility through year-end. Wilson’s year-end target for the S&P 500 is 3,900, about 7% below the closing price on Friday, the 20th. Adam Crisafulli of Vital Knowledge pointed out in an investor memo that rate hikes, geopolitical tensions, and U.S. federal government dysfunction and tax issues are key reasons for the ongoing pressure on the stock market.

Oil prices fell. On the New York Mercantile Exchange, December delivery West Texas Intermediate (WTI) crude closed at $85.49 per barrel, down $2.59 (2.94%) from the previous day.