[New York Stock Market] Rise on Strong Corporate Earnings Despite 'Hawkish Powell'

Fed Officials Dismiss Early Rate Cut Expectations
US Treasury "Concerns Over Commercial Real Estate"... NYCB Plummets 22%

The three major indices of the U.S. New York stock market closed slightly higher on the 6th (local time), supported by strong corporate earnings despite expectations of a delayed interest rate cut by the Federal Reserve (Fed). Fed officials reaffirmed their stance by once again drawing a line against early rate cut expectations. The 10-year U.S. Treasury yield, which had risen the previous day, stabilized and is moving around 4.09%, down from the previous day.

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On the day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 38,521.36, up 141.24 points (0.37%) from the previous session. The large-cap-focused S&P 500 index rose 11.42 points (0.23%) to 4,954.23, and the tech-heavy Nasdaq index ended the day at 15,609, up 11.32 points (0.07%).

By individual stocks, U.S. software company Palantir Technologies soared 30.8% on strong fourth-quarter earnings. Spotify Technology, the world's largest music streaming platform, also rose 3.88%, buoyed by earnings that exceeded market expectations and an increase in premium subscribers. New York Community Bancorp (NYCB) plunged 22.22% after U.S. Treasury Secretary Janet Yellen expressed concerns about the commercial real estate market.

Philip Blancato, CEO of Ladenburg Thalmann Asset Management, said, "We are standing on the edge of real volatility in the market," adding, "The past two days show what could happen over the next six to eight weeks."

Volatility in the U.S. stock market is increasing. Two trading days ago, on the 2nd, the New York stock market rose, supported by a surge in Meta's stock price following a 'surprise earnings' report. However, after the weekend, on the next trading day, the 5th, the market closed lower again as expectations for a March rate cut retreated due to Fed Chair Jerome Powell's 'hawkish remarks.' Powell appeared on CBS on the 4th and said, "I want to see more evidence that inflation is sustainably declining to 2%."

Fed officials continued to express views similar to Chair Powell's on the day, following their stance from the previous day. Loretta Mester, President of the Federal Reserve Bank of Cleveland, said at an event in Columbus, Ohio, "Lowering rates too early and too quickly without sufficient evidence that inflation will sustainably and appropriately return to 2% would be a mistake," adding, "If the economy develops as expected, we think we can gain confidence and start cutting rates by the end of this year." Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, who mentioned the possibility of a rise in the 'neutral rate' and the need for additional data confirmation the previous day, reaffirmed the same position. He said, "We have made a lot of progress on inflation, but we have not yet reached the Fed's target of 2%."

As market expectations for the timing of rate cuts are pushed back, the New York stock market is expected to continue experiencing volatility.

Sonal Desai, Chief Investment Officer (CIO) of Franklin Templeton Fixed Income, analyzed, "We are gradually aligning with the Fed," adding, "In December last year, the market thought the Fed would bring forward rate cuts, but the data is not cooperating. The data is not weak enough to pressure the Fed into cutting rates prematurely."

The prolonged high interest rate environment appears to be increasing market stress. According to the U.S. New York Fed's 2023 fourth-quarter Household Debt and Credit Report released on the day, the U.S. credit card delinquency rate rose to 6.36%, up 2.35 percentage points from the same period last year. This is the highest level in 12 years and 6 months since the second quarter of 2011 (6.9%), when the effects of the financial crisis lingered.

Concerns about a downturn in the commercial real estate market also persist. Secretary Yellen appeared before the U.S. House Financial Services Committee on the day and said, "I am worried" about commercial real estate, assessing that "complex factors will put a lot of stress on these (commercial) property owners." She added, "Some institutions are under significant stress because of this issue, but I believe it is manageable," and "Bank regulators are focused on this issue and are checking whether lenders have sufficient reserves and liquidity."

The U.S. 10-year Treasury yield is moving around 4.09%, down from the previous day. The 2-year Treasury yield has also fallen to around 4.39% and is trading at that level.

International oil prices are rising amid the risk of escalation in the Middle East, with U.S. Secretary of State Tony Blinken visiting the region. West Texas Intermediate (WTI) crude oil rose 0.7% to $73.31 per barrel, and Brent crude increased 0.8% to $78.59 per barrel.