[New York Stock Market] Big Tech Earnings and FOMC Ahead Drive Gains... Dow and S&P 500 Hit Record Highs

MS, Alphabet, Apple to Release Earnings This Week
Focus on Powell's Message at FOMC on 30-31

The three major indices of the U.S. New York stock market all closed higher on the 29th (local time), awaiting the earnings reports of big tech companies and the Federal Open Market Committee (FOMC) meeting. The S&P 500 and Dow Jones Industrial Average hit record highs, buoyed by expectations of strong earnings from big tech companies to be released this week and the possibility of Federal Reserve Chairman Jerome Powell signaling interest rate cuts. U.S. Treasury yields fell as the Treasury Department decided to reduce the amount of Treasury issuance in the first quarter of this year compared to last year's forecast.

On that day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at a record high of 38,333.45, up 224.02 points (0.59%) from the previous session. The large-cap-focused S&P 500 rose 36.96 points (0.76%) to 4,927.93, marking an all-time high. The tech-heavy Nasdaq index closed at 15,628.04, up 172.68 points (1.12%).

By individual stocks, Tesla rose 4.19% due to a rebound buying following recent declines. Digital financial services company SoFi Technologies surged 20.21% on improved earnings. iRobot, the maker of the Roomba robotic vacuum cleaner, plunged 8.77% after Amazon abandoned its acquisition plans. The merger plan was scrapped after the European Union (EU) competition authorities blocked Amazon's acquisition of iRobot on antitrust grounds. Amazon's stock rose 1.34%.

Investors are closely watching the upcoming FOMC meeting this week. At the January FOMC meeting, the benchmark interest rate, currently at 5.25-5.5%, is almost certain to be held steady. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market on this day reflected nearly a 98% probability that the Fed will keep the benchmark rate unchanged at 5.25-5.5% at the first FOMC meeting of the year on the 30th-31st. Investors are expected to seek hints about the timing and pace of future rate cuts from the message of Jerome Powell, Chair of the U.S. Federal Reserve, after the FOMC meeting.

With economic indicators showing mixed signals?growth remaining solid while inflation slows?attention is also focused on employment data to be released this week. On the 30th, the December Job Openings and Labor Turnover Survey (JOLTS) will be released, followed by January nonfarm payrolls and unemployment rate data on February 2nd. Investors will look for clues on the labor market trends that could increase inflationary pressures to predict the future path of interest rates.

Big tech earnings are also scheduled for release this week. On the 30th, Microsoft (MS) and Alphabet will report earnings, followed by Apple, Amazon, and Meta on February 1st. The stock performance of MS and Apple is particularly in focus. MS surpassed Apple to become the largest company by market capitalization, crossing the $3 trillion mark on the 25th. The stock trends of these two companies are expected to be influenced by whether their earnings meet market expectations.

Marco Colanovic of JPMorgan Chase said, "It is very important in the coming days to determine whether the valuation of large U.S. tech stocks can be sustained, given that investors are pricing in rate cuts earlier than Fed officials expect." Chris Larkin, Head of Trading and Investment at U.S. online brokerage E-Trade, analyzed, "This week will be crucial. For the market to maintain its recent breakthrough, big tech must avoid disappointing earnings, and the Fed must deliver encouraging news regarding interest rates. Employment should be strong but not too hot."

International oil prices are down more than 1%. West Texas Intermediate (WTI) crude oil fell $1.23 (1.6%) to $76.78, and Brent crude futures dropped $1.15 (1.4%) to $82.40. Oil prices had risen the previous day due to concerns over escalation in the Middle East after an attack by a pro-Iran armed group killed three U.S. soldiers in Jordan, but the White House drew a line on the possibility of escalation, halting the rise. Concerns over reduced demand due to China's real estate crisis also weighed on oil prices.

Andrea Tueni, Head of Sales Trading at Saxo Bank, said, "This week is very important," adding, "Three major factors?earnings, central banks, and geopolitical risks?can move the situation." He explained, "Even if volatility remains very low, if just one of these three factors ignites, the situation can be shaken."

In the New York bond market, Treasury yields are falling. This follows the U.S. Treasury Department's announcement that the amount of Treasury issuance in the first quarter of this year will be $760 billion, $55 billion less than the estimate made in October last year. The U.S. 10-year Treasury yield, a global bond yield benchmark, is hovering around 4.07%, while the 2-year Treasury yield, sensitive to monetary policy, is around 4.30%.