Downward Pressure on the Dow Jones 30 Industrial Average Index
The three major indices of the U.S. New York stock market showed mixed trends in early trading on Monday, the 8th (local time), ahead of the full-scale earnings season and inflation data releases this week. The Dow Jones Industrial Average, which includes Boeing, is under downward pressure as Boeing's stock plunged around 8% due to the recent fuselage hole incident.
At around 10:28 a.m. at the New York Stock Exchange (NYSE), the Dow was trading at 37,361, down 0.28% from the previous close. Meanwhile, the large-cap-focused S&P 500 index rose 0.42% to 4,716, and the tech-heavy Nasdaq index gained 1.03% to 14,673.
Currently, energy stocks in the S&P 500 are down nearly 3% due to a sharp drop in international oil prices. In contrast, technology, communication, and consumer goods stocks are showing gains. Boeing's stock has fallen about 8% after Alaska Airlines' Boeing 737 Max aircraft made an emergency landing due to a fuselage hole during flight, leading to a complete ban on the operation of the same aircraft model. This decline immediately impacted the Dow Jones Industrial Average, which includes Boeing among its 30 components. Apple rose more than 1% on news of the Vision Pro launch. Ahead of CES 2024, which opens in Las Vegas on the 9th, major big tech and semiconductor stocks are also rising. Nvidia, a leading AI stock, jumped more than 4% on news that mass production of semiconductor chips for China will begin in the second quarter.
After a weak start to the new year in the New York stock market amid concerns that market expectations for interest rate cuts were excessive, investors are now awaiting this week's scheduled inflation data releases, including the Consumer Price Index (CPI) and Producer Price Index (PPI), as well as fourth-quarter earnings reports starting with major banks. Since the December employment report released late last week showed mixed figures and did not provide clear policy hints, investors are expected to seek confirmation of the recent disinflation trend and gauge the future direction of monetary policy through the CPI and PPI data.
Wall Street currently expects the December Consumer Price Index (CPI), to be released on the 11th, to rise 0.2% month-over-month and 3.3% year-over-year. This represents a larger increase than the previous month. However, the core CPI, which excludes volatile energy and food prices, is estimated to have risen 0.2% month-over-month and 3.8% year-over-year, showing a slowdown compared to the prior month.
If inflation data confirms a faster-than-expected slowdown, market expectations for interest rate cuts are likely to gain momentum. Conversely, if the data disappoints, it could strengthen arguments that market optimism has been excessive, potentially leading to stock price corrections. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the interest rate futures market currently prices in more than a 65% chance that the Federal Reserve will cut rates by at least 0.25 percentage points in March. Although this probability has decreased compared to a week ago, the market still favors a rate cut in March.
Earnings reports from major banks such as JPMorgan, Wells Fargo, and Citigroup, which are typically seen as the kickoff for Wall Street's earnings season, will be released on the 12th. Delta Air Lines and UnitedHealth will also report earnings on the same day. According to FactSet, the net profits of S&P 500-listed companies for the fourth quarter of last year are estimated to have increased 1.3% year-over-year, marking two consecutive quarters of growth.
However, market attention is expected to focus more on first-quarter earnings guidance. As the cumulative effects of monetary tightening and high inflation are expected to become visible in corporate earnings starting this year, downward pressure on the New York stock market is anticipated depending on these guidance figures.
In the New York bond market, Treasury yields fell. The benchmark 10-year U.S. Treasury yield traded around 3.99%, while the 2-year yield, which is sensitive to monetary policy, hovered around 4.34%. The Dollar Index, which measures the value of the dollar against six major currencies, dropped more than 0.2% to 102.1. International oil prices plunged after Saudi Arabia lowered crude prices. West Texas Intermediate (WTI) crude oil prices fell more than 4% from the previous close, trading near $70 per barrel.
European stock markets also showed mixed trends. Germany's DAX index rose 0.65%, France's CAC index gained 0.34%, while the UK's FTSE index was slightly down.
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