New York Stock Market Rebounds on Eased Middle East Escalation Risk... Surprise Increase in March Consumer Spending

International Oil Prices Fall... WTI Down 0.8%
March Retail Sales Up 0.7% MoM, Exceeding Expectations

The three major indices of the U.S. New York stock market showed an upward trend in the early trading session on the 15th (local time). As Iran attacked the Israeli mainland, the market somewhat eased and attempted a rebound as the U.S. made every effort to prevent the escalation of conflict in the Middle East.

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As of 10:21 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average was trading at 38,148.22, up 0.43% from the previous close. The S&P 500, which focuses on large-cap stocks, rose 0.38% to 5142.8, and the tech-heavy Nasdaq index was up 0.21% at 16,209.66.

The market opened for the first time since Iran attacked the Israeli mainland on the 13th after attacking its own consulate. The U.S. repeatedly emphasized restraint in retaliation to Israel to prevent escalation, and Iran also indicated it would not carry out additional attacks unless Israel retaliates, somewhat easing concerns about a 'fifth Middle East war.' Investors are also showing a sense of relief for now.

International oil prices are also declining. West Texas Intermediate (WTI) crude oil fell $0.69 (0.8%) to $84.97 per barrel compared to the previous trading day, and Brent crude, the global oil price benchmark, dropped $0.81 (0.9%) to $89.64.

The variable that will determine the future flow of the asset market is Israel's response method and level toward Iran. Krishna Guha, Senior Managing Director at Evercore ISI, analyzed, "If Israeli Prime Minister Benjamin Netanyahu appears willing to willingly follow the advice of the U.S., it could be a factor for a certain degree of relief rally in the market today."

The March retail sales data released on the day confirmed that the U.S. economy remains robust. According to the U.S. Department of Commerce, retail sales last month increased by 0.7% compared to the previous month, significantly exceeding the market forecast of 0.4%. Among the 13 retail categories, 8 showed an increase. E-commerce consumption rose by 2.7%, gas station sales increased by 2.1%, while automobile sales decreased by 0.7%.

The retail sales indicator is considered a barometer for judging the overall economic trend as it accounts for two-thirds of the U.S. real economy. The larger-than-expected increase in consumption last month raises concerns about the risk of entrenched hot inflation. If a strong labor market supports consumption and high prices continue, it is expected that the Federal Reserve (Fed) will be more cautious about cutting interest rates.

Andrew Hunter, Deputy U.S. Economist at Capital Economics, analyzed, "The recent revival in job growth and the continued resilience of consumption are another reason to doubt that the Fed will start cutting rates anytime soon."

There are also views that there will be no rate cuts within the year. Thorsten Slok, Economist at Apollo Global Management, predicted, "Considering that the economy continues to reaccelerate, the Fed will not cut rates in 2024."

Meanwhile, John Williams, President of the New York Federal Reserve Bank, appeared on Bloomberg TV on the day and pointed out the overall strength of consumption and the economy but said that if inflation gradually eases, the Fed will begin cutting the benchmark interest rate within the year.

U.S. Treasury yields have been rising after the release of the March retail sales data. The 2-year U.S. Treasury yield, sensitive to monetary policy, rose 10 basis points (1bp = 0.01 percentage point) from the previous trading day to 4.99%. The 10-year U.S. Treasury yield, a global bond yield benchmark, moved up 16 basis points to around 4.65%.

By individual stocks, Goldman Sachs is up 3.88% on strong first-quarter earnings. Goldman Sachs reported a 28% increase in first-quarter profits to $4.13 billion, with earnings per share (EPS) of $11.58, higher than the market's initial EPS forecast of $8.56. According to LSEG, this is the highest since the third quarter of 2021. Tesla is down 2.75% after announcing plans to cut 10% of its global workforce. Apple is down 0.89% after first-quarter iPhone shipments fell about 10% due to weak sales in China.