New York Stock Market Mixed Amid Rate Cut Expectations... Dow and S&P 500 Up

Comments by Neel Kashkari Highlight Uber's Performance

The three major indices of the U.S. New York stock market showed mixed movements in the early session on the 7th (local time), hovering around the flat line. Following indicators of a slowdown in the labor market and dovish remarks from Federal Reserve (Fed) officials favoring monetary easing, expectations for interest rate cuts have been revived, with investors taking a wait-and-see approach to the market.

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As of 9:58 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average was up 0.22% from the previous close, standing at 38,938.49. The S&P 500, which is centered on large-cap stocks, rose 0.12% to 5,187.12, while the tech-heavy Nasdaq index traded down 0.08% at 16,336.35.

By individual stocks, Walt Disney fell 8.19% after its earnings announcement. Disney's first-quarter earnings per share (EPS) came in at $1.21, beating the market research firm Refinitiv’s estimate of $1.10, but its revenue of $22.08 billion fell short of expectations. Palantir, a U.S. defense contractor, dropped 13.56% after reporting earnings below market expectations.

The U.S. stock market closed higher across the board the previous day. This was due to Fed officials repeatedly signaling that current interest rates are sufficiently restrictive, which revived hopes for rate cuts.

John Williams, President of the Federal Reserve Bank of New York, attended the 'Milken Global Conference 2024' held at the Beverly Hilton Hotel in Los Angeles (LA) the previous day and said, "Current monetary policy is in a very good position," adding, "I expect the benchmark interest rate to be cut." He stated, "We are looking at all the data," indicating that future monetary policy decisions will be based on incoming indicators. However, he did not specify the exact timing of the rate cut.

Thomas Barkin, President of the Richmond Fed, also said the previous day at the Rotary Club in Columbia, South Carolina, "I am optimistic that the current restrictive interest rate level can suppress demand and bring inflation back to target levels." He added, "I do not see the economy overheating, but the Fed knows how to respond if it does," emphasizing, "If the economy slows down more significantly, the Fed has enough firepower to support it as needed."

The remarks from these two Fed officials align with earlier comments by Chair Jerome Powell on the 1st, who dismissed the possibility of a rate hike. As a result, expectations for interest rate cuts within the year have resurfaced in the market.

Signals of a slowdown in the labor market were also detected. According to the April employment report released by the U.S. Department of Labor on the 3rd, nonfarm payrolls increased by 175,000 compared to the previous month, significantly below the Dow Jones consensus forecast of 240,000. The unemployment rate rose 0.1 percentage points to 3.9%, and the weekly wage growth slowed to 0.2% month-over-month.

Rob Haworth, Senior Investment Strategist at U.S. Bank, analyzed, "The market seems to be looking for a somewhat definitive solution regarding inflation. Inflation is still persistent but is not accelerating to problematic levels. There is room to hold risk assets."

Fed officials' remarks are also scheduled for the day. Market attention is focused on comments from Neel Kashkari, President of the Minneapolis Fed. On the 10th, remarks from Fed Governor Michelle Bowman and Vice Chair for Supervision Michael Barr are expected.

Earnings announcements from companies including Uber will continue. According to Bloomberg Intelligence, over 80% of companies included in the S&P 500 have reported first-quarter earnings, with earnings growth rates exceeding expectations.

Government bond yields are falling. The U.S. 10-year Treasury yield, a global benchmark for bond yields, is trading at around 4.44%, down 4 basis points (1 bp = 0.01 percentage points) from the previous trading day. The 2-year Treasury yield, sensitive to monetary policy, remains near 4.82%, similar to the previous day.

International oil prices are rising as Saudi Arabia raised June crude oil prices and uncertainty over a ceasefire in the Gaza Strip increased. West Texas Intermediate (WTI) crude oil rose $0.87 (1.1%) from the previous day to $78.98 per barrel, while Brent crude, the global benchmark, increased $0.77 (0.9%) to $83.73 per barrel.