[New York Stock Market] Rise on Strong Corporate Earnings and Falling Treasury Yields... Tesla Up 15%

Tesla up 15%, Apple also rises 2.5%
Big events this week: FOMC, Employment Report, Big Tech Earnings, and more

The three major indices of the U.S. New York stock market all closed higher on the 29th (local time). Tesla, which showed strong corporate earnings and received a green light for the launch of fully autonomous driving (FSD) software in China, surged more than 15%, driving the market up. The decline in Treasury yields also stimulated investor sentiment. Investors are awaiting the earnings releases of big tech companies such as Apple and Amazon this week, along with the April Federal Open Market Committee (FOMC) meeting and employment report announcements.

On the day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average rose 146.43 points (0.38%) from the previous trading day to close at 38,386.09. The large-cap-focused S&P 500 index increased by 16.21 points (0.32%) to 5,116.17, and the tech-heavy Nasdaq index gained 55.18 points (0.35%) to finish at 15,983.08.

By stock, Tesla soared 15.31% on news that it passed data safety inspections in China, bringing it one step closer to the local launch of its FSD software. Apple rose 2.48% after investment firm Bernstein upgraded its rating from "market perform" to "outperform." Bernstein maintained Apple's 12-month target price at $195, suggesting the stock could rise an additional 15%. Bernstein viewed Apple's stock as having fallen too much due to weak iPhone 15 sales and declining revenue in China. Domino's Pizza rose 5.62% after its earnings beat market expectations.

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However, Microsoft (MS) fell 1%. Alphabet, Google's parent company, and Meta, Facebook's parent company, dropped 3.33% and 2.41%, respectively.

Companies continue to report strong first-quarter earnings. According to market research firm FactSet, 46% of the companies included in the S&P 500 have reported earnings so far, with more than four out of five exceeding expectations. Investors are focusing on big tech earnings. Amazon will report on the 30th, and Apple will announce earnings on the 2nd of next month.

The market is also focusing on the FOMC meeting, which will be held over two days starting on the 30th. While the stock market shows strength supported by strong corporate earnings, the key issue is how much uncertainty about future monetary policy will negatively impact stock prices.

The Fed is expected to maintain the current benchmark interest rate at 5.25-5.5%, the highest level in 23 years, at this meeting. The key point to watch is how hawkish Fed Chair Jerome Powell’s message will be. With inflation remaining strong this year, a delay in Fed rate cuts is becoming a foregone conclusion. The core Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, rose 2.8% year-over-year in March, exceeding the expert forecast of 2.6%. As a result, market expectations for rate cuts are retreating. There are views that there may be only one rate cut this year or possibly none at all. There is also speculation that the Fed might consider raising rates again.

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Jeff Roach, Chief Economist at LPL Financial, said, "One important lesson investors learned last week is that the economy is less sensitive to interest rates in this cycle," adding, "Some parts of the economy appear immune to interest rates, putting the Fed in a difficult position."

However, concerns have been raised that the stock market’s upward momentum could falter once the earnings season ends and uncertainty about Fed monetary policy increases.

David Kostin, Chief U.S. Equity Strategist at Goldman Sachs, said, "Over the past few weeks, concerns about hawkish monetary policy amid better growth have increased," and "stocks have found it harder to digest this."

On the 3rd of next month, after the FOMC meeting, the U.S. Department of Labor will release the April employment report. If solid employment continues amid inflation that has not significantly decreased, rate cuts will be further delayed. The market expects nonfarm payrolls to increase by 243,000 in April, a significant decrease from 303,000 in March. The April unemployment rate is expected to remain steady at 3.8%.

U.S. Treasury yields are on a downward trend. The 10-year Treasury yield, a global benchmark for bond yields, fell 5 basis points (1bp = 0.01 percentage points) from the previous trading day to 4.61%, while the 2-year Treasury yield, sensitive to monetary policy, dropped 2 basis points to 4.97%.

International oil prices are weak amid news of ceasefire negotiations between Israel and the Palestinian militant group Hamas and retreating expectations for U.S. rate cuts. West Texas Intermediate (WTI) crude oil closed at $82.63 per barrel, down $1.22 (1.5%) from the previous day, and Brent crude, the global oil price benchmark, fell $1.10 (1.2%) to $88.40.