New York Stock Market Rises on Powell's Remarks Dismissing Interest Rate Hike

Focus on Corporate Earnings Including Apple and April Employment Report

The three major indices of the U.S. New York stock market showed an upward trend in the early trading session on the 2nd (local time). The market was relieved as Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), dismissed the possibility of a rate hike. After digesting Powell's more dovish-than-expected remarks (favoring monetary easing), investors are once again focusing on corporate earnings, including Apple, and the U.S. Labor Department's employment report.

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As of 9:51 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average was trading at 38,005.94, up 0.27% from the previous close. The S&P 500, which is centered on large-cap stocks, rose 0.33% to 5,034.77, and the tech-heavy Nasdaq index was up 0.62% at 15,701.96.

By individual stocks, U.S. semiconductor company Qualcomm rose 9.32% after reporting earnings that exceeded expectations. The previous day, Qualcomm announced that its fiscal second-quarter revenue was $9.39 billion, and adjusted earnings per share (EPS) were $2.44. These figures surpassed LSEG analysts' estimates of $9.34 billion and $2.32, respectively. Carvana, a used car sales platform, surged 34.45% after reporting record-high earnings. Apple, which is reporting earnings on the day, rose 1.49%. DoorDash, a restaurant delivery service, fell 13.82% due to earnings below market expectations.

At the Federal Open Market Committee (FOMC) meeting held for the third time this year, the Fed kept the federal funds rate unchanged for the sixth consecutive time at 5.25-5.5%. The Fed's policy statement added a new phrase indicating no progress in slowing inflation. The Fed assessed that "in recent months, there has been insufficient additional progress toward slowing inflation to the 2% target."

The market focused on Chairman Powell's press conference immediately following the release of the FOMC policy statement. Powell also indicated a prolonged high-interest-rate stance, saying, "It will take longer than expected to gain confidence that inflation is on a sustainable path toward 2%." However, the market took significance in his dismissal of the possibility of a rate hike. Powell said, "The likelihood of the next policy rate move being an increase is low," and added, "I want to say it is very unlikely." When asked if rate hikes were discussed, he replied, "There was policy discussion about maintaining the current restrictive level," explaining that no discussions about hikes took place.

Wall Street widely evaluated Powell's remarks as less hawkish (favoring monetary tightening) than expected. Citibank diagnosed, "Powell assessed that the current rate is sufficiently restrictive," and "Ultimately, it means moving toward rate cuts." Evercore IS noted, "It was less hawkish than feared," and "The timing of rate cuts has been delayed, not withdrawn."

However, a prolonged high-interest-rate environment seems inevitable. Eric Winograd, Director of Advanced Market Economic Research at AllianceBernstein, analyzed, "The Fed's order is to stay higher for longer," and "Unless there is a dramatic change, we have passed the 'higher' phase and entered the 'longer' phase."

The labor market, which stimulates inflation, remains robust. According to the U.S. Labor Department on the day, new unemployment claims for the week of April 21-27 totaled 208,000. This was below the expert forecast of 212,000 and the same level as the previous week (208,000). Compared to the pre-COVID-19 pandemic period, this remains historically low.

Now, the market's attention is turning to the April employment report and corporate earnings such as Apple’s. After the market closes on the day, Apple and pharmaceutical company Amgen will report earnings.

On the 3rd, the U.S. Labor Department will release the April employment report, which most accurately reflects employment conditions. The market expects nonfarm payrolls to increase by 243,000 in April, a significant decrease from the March increase of 303,000. The April unemployment rate is expected to remain steady at 3.8%, the same as the previous month.

The U.S. 10-year Treasury yield, a global bond yield benchmark, is trading at around 4.64%, up 5 basis points (1bp = 0.01 percentage points) from the previous trading day. The 2-year Treasury yield, sensitive to monetary policy, is moving around 4.94%, similar to the previous trading day.

International oil prices are on the rise. West Texas Intermediate (WTI) crude oil closed at $79.47 per barrel, up $0.47 (0.6%) from the previous trading day, and Brent crude, the global oil price benchmark, closed at $84.02, up $0.58 (0.7%).