New York Stock Market Mixed Amid Aftershocks of Powell's Remarks and Corporate Earnings... Dow Up 0.35%

Unemployment Benefit Claims Slightly Below Expectations
Fed Officials Scheduled to Speak

The three major indices of the U.S. New York stock market showed mixed trends in the early trading session on the 18th (local time). Following the aftershock of a sharp decline in tech stocks due to Federal Reserve (Fed) Chair Jerome Powell's indication of a delay in interest rate cuts, the market, which had fallen the previous day, is showing a cautious stance without a clear direction amid rising Treasury yields and strong corporate earnings.

[Image source=Yonhap News]

As of 9:38 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average was trading at 37,835.44, up 0.22% from the previous close. The large-cap-focused S&P 500 index was down 0.12% at 5,016.05, and the tech-heavy Nasdaq index was down 0.42% at 15,617.21.

By individual stocks, Taiwanese semiconductor company TSMC is down 5.46% despite posting an earnings surprise for the first quarter of this year. TSMC announced that its net profit for Q1 increased by 8.9% year-on-year to 225.5 billion New Taiwan dollars (approximately 9.57 trillion Korean won). This exceeded experts' expectations of 214.91 billion New Taiwan dollars (about 9.13 trillion Korean won). U.S. Micron is down 1.07% despite news of a $6.1 billion (about 8.4 trillion Korean won) semiconductor subsidy from the Department of Commerce. Blackstone fell 1.25% on news of a dividend cut.

Investors are closely watching corporate earnings. According to market research firm FactSet, more than 11% of companies in the S&P 500 have reported earnings, and among them, 72% have exceeded analysts' expectations.

The global equity strategist at Goldman Sachs Group said, "Growth is okay, but the likelihood of gaining momentum from the interest rate cuts that the market expected is low," adding, "This is causing indigestion, so earnings will become really important going forward."

The newly filed unemployment claims announced that morning revealed a still robust labor market. According to the U.S. Department of Labor, new unemployment claims for the week of April 7-13 totaled 212,000. This was slightly below the expert forecast of 215,000 and the same as the previous week’s 212,000. Compared to the pre-COVID-19 pandemic period, this remains a record low level. The Department of Labor assessed that companies are still reluctant to lay off workers. The Fed is monitoring related indicators as it views an overheated labor market as potentially fueling inflation.

The market continues to feel the aftereffects of Chair Powell’s remarks on the 16th.

Chair Powell said at a Canadian economic forum held in Washington D.C., "Recent data has not clearly given greater confidence that inflation is making progress toward the Fed’s goals," and "Instead, it suggests that achieving such confidence may take longer than expected." He explained, "For now, considering the strength of the labor market and the inflation progress so far, it is appropriate to give restrictive policies time to work." About a month ago, he mentioned that the timing of rate cuts was "not far off," but with recent Consumer Price Index (CPI) data exceeding expectations for three consecutive months, he has shifted to a more hawkish (monetary tightening preference) stance.

The Fed also stated in its Beige Book economic report released the previous day that "overall economic activity expanded modestly and in a balanced manner since late February." Among the 12 districts, 10 showed slight or modest growth, with two more districts showing growth compared to the previous Beige Book.

Market expectations for rate cuts are also decreasing. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market on the day reflected a 44% chance of the Fed cutting rates by at least 0.25 percentage points at the July Federal Open Market Committee (FOMC) meeting and about a 69% chance in September.

Michael Landsberg, Chief Investment Officer (CIO) at Landsberg Bennett Private Wealth Management, diagnosed, "With expectations for rate cuts significantly lowered, the stock market has been weak in recent weeks."

Many Fed officials are also scheduled to speak on the day. Investors, who have grown cautious following Chair Powell’s indication of a delay in rate cuts, are expected to seek hints about the future direction of monetary policy through these officials’ remarks.

U.S. Treasury yields are rising slightly. The 10-year U.S. Treasury yield, a global bond yield benchmark, rose 4 basis points (1 bp = 0.01 percentage points) to 4.62%, while the 2-year Treasury yield, sensitive to monetary policy, moved up 4 basis points to 4.97%.

International oil prices continued their weakness following a 3% drop the previous day. West Texas Intermediate (WTI) crude oil closed down 0.6% at $82.17 per barrel, and Brent crude, the global oil price benchmark, fell 0.7% to $86.66 per barrel.