[New York Stock Market] Mixed Close Ahead of FOMC... MS Falls Despite Strong Earnings

MS and Google Fall in After-Hours Trading
December Job Openings Increase... March Pivot Outlook Delayed
Focus on Powell's Message After FOMC

The three major indices of the U.S. New York stock market closed flat on the 30th (local time), awaiting the earnings reports of big tech companies and the Federal Open Market Committee (FOMC) meeting. Microsoft (MS), which released its earnings after the market closed, posted results that exceeded market expectations, but its stock price declined in after-hours trading. Employment data showed stronger-than-expected resilience, dampening hopes for a rate cut in March. The market is focusing on the message that Federal Reserve (Fed) Chair Jerome Powell will deliver after the regular FOMC meeting the next day.

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On this day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average rose 133.86 points (0.35%) from the previous session to close at 38,467.31, setting a new all-time high once again. The large-cap-focused S&P 500 index fell 2.96 points (0.06%) to 4,924.97, and the tech-heavy Nasdaq index dropped 118.15 points (0.76%) to close at 15,509.9.

By individual stocks, General Motors (GM) surged 7.8% after reporting fourth-quarter results that exceeded market expectations. U.S. electronics company Sanmina soared 28.2% following better-than-expected earnings. Logistics company UPS, which announced a decrease in domestic and international cargo volume and plans to cut 12,000 jobs, plunged 8.19%. Home appliance maker Whirlpool fell 6.6% after issuing earnings guidance below market expectations for this year.

The market showed a cautious stance as it awaited big tech earnings and the results of the FOMC meeting the following day.

The first tape of the "Earnings Super Week," during which big tech companies release their earnings one after another, was kicked off by MS and Alphabet, Google's parent company. MS announced its earnings after the market closed, reporting that its revenue for the second quarter of fiscal year 2024 (October to December last year) increased 17.6% year-over-year to $62.02 billion. Net income rose 33% year-over-year to $21.87 billion (earnings per share (EPS) of $2.93). These figures surpassed market expectations (revenue of $61.12 billion and EPS of $2.78). Revenue from the intelligent cloud segment, including AI-focused Azure cloud services, grew 30%. MS shares declined 1.26% in after-hours trading.

Alphabet, Google's parent company, reported fourth-quarter advertising revenue of $65.5 billion, slightly below market expectations of $65.8 billion, causing its shares to fall 4.7% in after-hours trading.

Following MS and Alphabet, Apple, Amazon, and Meta will release their earnings on the 1st of next month.

Case Buchan, Senior Portfolio Manager at Globalt Investment, said, "There does not necessarily need to be a consistent message this earnings season. This tide cannot lift all boats. So far, we have seen clear winners and clear losers in this earnings season."

The employment data released on this day showed stronger labor market resilience than expected, dampening hopes for a rate cut in March.

According to the Job Openings and Labor Turnover Survey (JOLTS) released by the U.S. Department of Labor, the number of job openings in U.S. companies in December last year was 9.026 million. This was an increase of 101,000 from the previous month, marking the largest increase in three months. It also exceeded the market forecast of 8.75 million. The slight increase in job openings last month indicates that the U.S. labor market is still maintaining resilience. On the other hand, voluntary quits fell to 3.4 million, the lowest level in about three years since January 2021, signaling signs of a slowdown in the labor market.

As a result, attention is increasingly focused on the January employment report to be released by the Department of Labor on February 2. The employment report is a key indicator that more clearly reveals the labor market situation, including nonfarm payrolls and the unemployment rate. It is expected to provide a basis for predicting the future direction of Fed interest rates.

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The biggest event the market is watching is the message that Chair Powell will deliver after the FOMC meeting, which continues until the next day. At the January FOMC, the benchmark interest rate, currently at 5.25-5.5%, is expected to remain unchanged. The key is Powell's remarks, which will provide clues about the timing and pace of rate cuts. Alexandre Baradez, Senior Market Analyst at IG Markets, said, "Everything will be decided during the three days when the Fed meeting and U.S. tech earnings are announced," adding, "The market is waiting for Powell to open the door to a rate cut in March, but it is more likely that signals will be sent in the second quarter."

International oil prices are rising due to geopolitical instability in the Middle East and the International Monetary Fund's (IMF) upward revision of the global economic growth forecast for this year. West Texas Intermediate (WTI) crude oil prices rose $1.04 (1.35%) to $77.82 per barrel. Brent crude futures also increased by $0.47 to trade at $82.87.

On this day, the IMF raised its global growth forecast for this year to 3.1%, up 0.2 percentage points from the October forecast of 2.9% last year.

In the New York bond market, the yield on the U.S. 10-year Treasury note, a global benchmark for bond yields, fell to around 4.03%. This is interpreted as a result of the Treasury Department's announcement of a reduced borrowing estimate for the first quarter the previous day. The yield on the 2-year Treasury note, which is sensitive to monetary policy, rose slightly and is trading around 4.34%.