New York Stock Market Falls on Tech Slump and Fed Hawkish Remarks... Tesla Down 2.6%

Neil Kashkari "Cannot Rule Out Interest Rate Hike"
Tesla Drops on US Prosecutors' Securities Fraud Investigation News
Uber Returns to Loss After 3 Quarters

The three major indices of the U.S. New York stock market showed a downward trend in the early trading session on the 8th (local time). Weakness in tech stocks and hawkish (preference for monetary tightening) remarks from Federal Reserve (Fed) officials the previous day dragged the indices down. It is also analyzed that profit-taking selling emerged as stock prices rose in recent days on expectations of interest rate cuts.

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As of 9:45 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average was down 0.04% from the previous close at 38,868.48. The large-cap focused S&P 500 index fell 0.26% to 5,174.14, and the tech-heavy Nasdaq index was down 0.49% at 16,252.07.

By stock, Uber fell 5.41%. On the day, Uber announced that its first-quarter revenue increased 15% year-on-year to $8.82 billion, while its net loss expanded more than fourfold to $654 million (a net loss of $0.32 per share). Although revenue exceeded market expectations, the net loss disappointed the market that had anticipated profits. Intel also dropped 2.02% after lowering its second-quarter revenue forecast. Tesla fell 2.59% amid news that U.S. prosecutors are investigating whether the company committed securities and wire fraud by misleading investors about its autonomous driving system.

The New York stock market closed mixed near the flat line the previous day. The market took a breather while gauging the future interest rate path through Fed officials' remarks amid expectations of rate cuts.

Neel Kashkari, president of the Minneapolis Federal Reserve Bank and a representative hawk of the Fed, stated the previous day that he does not rule out the possibility of a rate hike. Speaking at the 'Milken Global Conference 2024' held at the Beverly Hilton Hotel in Los Angeles (LA), he said, "I believe there is a high need to keep rates at the current level for a long time," adding, "It is likely that we will stay at this level much longer than we currently expect or the public expects until we confirm the effects of monetary policy." He also said, "Although it is not a likely scenario, we cannot rule out (a rate hike)."

Additionally, Kashkari pointed out in a post on the Minneapolis Fed website that "recent data, from a strong housing market to sustained strong demand, suggests that the Fed's policy may not be as restrictive as officials think," and "inflation could stabilize around 3%."

He was cautious about the interest rate path for this year. At the conference, he said, "In March, I penciled in two rate cuts by the end of this year, but in June, I am not sure where we will be," adding, "We could stay at two cuts or go down to zero cuts. We need to look at the data comprehensively."

This contrasts with the more dovish (preference for monetary easing) messages from Fed officials the previous day, who viewed current rates as sufficiently restrictive.

Accordingly, the market is expected to seek hints about future rate movements through additional remarks from Fed officials throughout this week. Scheduled speeches on the day include Fed Vice Chair Philip Jefferson, Fed Governor Lisa Cook, and Boston Fed President Susan Collins. On the 10th, Fed Governor Michelle Bowman and Fed Supervisory Vice Chair Michael Barr are planned to speak.

On the day, Sweden's central bank, the Riksbank, cut its benchmark interest rate from 4% to 3.75%. This is the first rate cut in eight years. As inflation begins to ease, it became the second European country after Switzerland to lower rates. With the timing of the U.S. Fed's rate cuts uncertain, central banks around the world are taking individual measures tailored to their own situations.

Government bond yields are rising slightly. The U.S. 10-year Treasury yield, a global bond yield benchmark, rose 2 basis points (1bp = 0.01 percentage points) from the previous trading day to 4.48%, while the 2-year Treasury yield, sensitive to monetary policy, increased 1bp to 4.83%.

International oil prices are weak due to increased U.S. inventories and demand pressure outlooks. West Texas Intermediate (WTI) crude oil is trading at $77.45 per barrel, down $0.93 (1.2%) from the previous day, and Brent crude, the global oil price benchmark, is down $0.97 (1.2%) at $82.19.