New York Stock Market Rises on Tech Stock Rally... Focus on June PCE and Q2 Growth Rate

Biden Abandons Reelection... Will the 'Trump Trade' Calm Down?
Q2 GDP on 25th, June PCE Inflation Data on 26th
Alphabet and Tesla Earnings Announced on 23rd

The three major indices of the U.S. New York stock market are showing an upward trend in early trading on the 22nd (local time), supported by a rally in tech stocks. With President Joe Biden, who faced pressure to withdraw as the Democratic candidate after a poor presidential debate performance, deciding not to seek re-election, there is speculation that the 'Trump Trade'?which benefited stocks favored by former Republican President Donald Trump?may calm down. Investors are focusing on key indicators this week, including big tech earnings, June inflation, and second-quarter gross domestic product (GDP) growth.

As of 9:45 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average is up 0.18% from the previous close, standing at 40,360.38. The S&P 500, which is centered on large-cap stocks, is up 0.92% at 5555.51, while the tech-heavy Nasdaq index is trading 1.4% higher at 17,974.98.

By individual stocks, Nvidia is up 4.01% on news that it is preparing a customized 'Blackwell' chip aimed at the Chinese market, circumventing U.S. export controls on China. Apple is up 1.15%. Microsoft (MS) is showing a 1.28% gain, while Alphabet, Google's parent company, and Meta, Facebook's parent company, are up 2.4% and 2.87%, respectively. Bank of America (BoA) is down 1.3% following news that Berkshire Hathaway, led by investment guru Warren Buffett, sold $1.5 billion worth of shares last week. Cybersecurity firm CrowdStrike is plunging 9.03% after Guggenheim downgraded its investment rating from 'buy' to 'neutral.'

President Biden announced on Sunday, just over three months before the November election, that he would abruptly withdraw as the Democratic candidate. After the TV debate on the 27th of last month raised concerns about his age and cognitive abilities, and amid fears within the Democratic Party that he would lose to former President Trump, Biden could not withstand the pressure to step down. He officially endorsed Vice President Kamala Harris as the next Democratic presidential candidate. Investors are closely watching the impact of Biden's decision on the market.

Jay Hatfield, CEO of Infrastructure Capital Advisors, said, "The fact that Biden endorsed Harris reduces uncertainty," adding, "Since Harris is considered somewhat more likely to win, the Trump Trade may retreat slightly today."

Investors are digesting the issue of Biden's withdrawal, which has shaken up the U.S. presidential race, while awaiting key indicators to be released this week.

On the 26th, the U.S. Department of Commerce will release the June Personal Consumption Expenditures (PCE) price index. The core PCE price index, which excludes volatile food and energy prices, is expected to have risen 0.1% month-over-month. Accordingly, the second-quarter core PCE inflation rate is forecasted to fall below the Federal Reserve's (Fed) 2% target. If the downward trend in inflation continues, the foundation for a rate cut in September will likely become even stronger.

One day before the June PCE inflation release, on the 25th, the preliminary second-quarter GDP growth rate will be announced. Growth is expected to be 1.9% annualized quarter-over-quarter, up from 1.4% in the first quarter. If the second-quarter growth rate is around 2%, it will lend weight to expectations of a soft landing for the U.S. economy.

The market is already pricing in a rate cut in September amid signs of easing inflation, cooling labor markets, and slowing growth. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market is currently reflecting a 98% probability that the Fed will cut rates by at least 0.25 percentage points at the September FOMC meeting.

Big tech earnings announcements are also scheduled for this week. On the 23rd, Alphabet, Google's parent company, and Tesla will report earnings. IBM will release its results on the 24th. Next week, other Magnificent Seven companies, including Microsoft (MS) and Apple, will follow. Depending on these earnings, it will be decided whether the tech stocks, which plunged last week, will continue their decline or manage to rebound.

U.S. Treasury yields are steady. The 10-year U.S. Treasury yield, a global benchmark for bond yields, is down 2 basis points (1bp = 0.01 percentage points) from the previous trading day, at 4.21%. The 2-year Treasury yield, sensitive to monetary policy, is trading around 4.51%, unchanged from the previous day.

International oil prices are declining. West Texas Intermediate (WTI) crude is down $0.67 (0.85%) from the previous day, trading at $77.97 per barrel, while Brent crude, the global oil price benchmark, is down $0.46 (0.56%) at $82.17 per barrel.