New York Stock Market Dips Early Amid Earnings and Strong GDP Watch

The three major indices of the U.S. New York stock market all opened lower on the 26th (local time) amid ongoing earnings reports from major big tech companies. Even the much stronger-than-expected U.S. third-quarter Gross Domestic Product (GDP) failed to have a positive impact on investor sentiment.

At around 10:10 a.m. at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average was trading at 32,973, down 62.56 points (0.19%) from the previous session. The large-cap-focused S&P 500 index fell 27.85 points (0.67%) to 4,158, while the tech-heavy Nasdaq index dropped 148.42 points (1.16%) to 12,672. The Nasdaq has entered a technical correction zone, having fallen more than 10% from its previous high.

Currently, within the S&P 500, telecommunications, consumer discretionary, energy, technology, and healthcare sectors are declining, while real estate, utilities, and materials sectors are rising. Alphabet, which plunged nearly 9% the previous day, is down more than 3% today. Amazon, which is scheduled to report earnings after the market close, is down over 2%. Major tech stocks such as Microsoft, Apple, Tesla, and Nvidia are all down between 1% and 2%. Toy manufacturer Hasbro plunged more than 10% due to weaker-than-expected earnings. Southwest Airlines also fell more than 2%.

[Image source=UPI Yonhap News]

Investors are closely watching corporate third-quarter earnings results, movements in Treasury yields, and economic indicators released today, including GDP and weekly jobless claims.

Initially, the market expected strong big tech earnings to boost sentiment in the New York stock market this week, but the results have fallen short of expectations. Despite beating revenue estimates, Alphabet’s stock has been plunging due to a slowdown in cloud growth. Meta, which reported earnings after the previous day’s close, is also seeing stock declines amid concerns over operating losses in its Reality Labs division, which focuses on augmented reality (AR) and virtual reality (VR). Amazon is set to release its earnings after today’s market close.

Meanwhile, economic indicators showed strength but failed to change market sentiment. In fact, stronger-than-expected economic growth has fueled expectations that the Federal Reserve (Fed) will maintain higher interest rates for a longer period.

The U.S. third-quarter GDP growth rate released today was 4.9%, far exceeding market forecasts. This is the highest level since the fourth quarter of 2021. Despite high interest rates and inflation, consumer spending surged compared to the previous quarter’s 2.1%. The Bloomberg consensus forecast (4.3%) and the Dow Jones consensus forecast (4.7%) were both surpassed. Additionally, durable goods orders in September rose 4.7% month-over-month to $297.2 billion, marking an increase after three months of decline.

The weekly initial jobless claims released on the same day totaled 210,000, an increase of 10,000 from the previous week. Although this exceeded Wall Street expectations, it remains at a historically low level. Continuing claims, which represent those filing for unemployment benefits for at least two weeks, rose by 63,000 to 1.79 million.

Jamie Cox, Managing Partner at Harris Financial Group, said, "It is difficult to sustain economic growth when stock market earnings are this poor," adding, "Investors believe that ZIRP (Zero Interest Rate Policy) is the only condition that allows economic growth, but this is clearly a mistaken assumption." Kelly Cox, equity strategist at eToro, commented, "The U.S. economy showed remarkable resilience last quarter," and "It is hard to say it is in a recession."

In the New York bond market, the 10-year U.S. Treasury yield is hovering around 4.9%. The 30-year yield stands at 5.06%, and the 2-year yield, which is sensitive to monetary policy, is also at 5.06%. The Dollar Index, which measures the value of the U.S. dollar against six major currencies, rose about 0.3% to 106.8, the highest level since October 6 when it reached 106.974.

Tomorrow, the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, will also be released. The September PCE price index is estimated to have risen 0.4% month-over-month.

The market still largely expects the Fed to keep interest rates unchanged in November. According to the CME FedWatch tool, as of today, federal funds futures are pricing in a more than 98% probability that the Fed will hold rates steady at 5.25-5.5% at the FOMC meeting scheduled for October 31-November 1. Since Fed Chair Powell’s remarks last week, there is nearly a 2% chance of a rate cut rather than a hike. Despite expectations of prolonged high rates, the possibility of an immediate rate increase is considered very low.

The European Central Bank (ECB) held its monetary policy meeting today and decided to keep policy rates unchanged. This is the first pause after ten consecutive rate hikes.

European stock markets are declining. Germany’s DAX index is down 1.2%. France’s CAC index and the UK’s FTSE index are down 0.48% and 0.84%, respectively.