New York Stock Market Mixed in Narrow Range... Awaiting Alphabet and Tesla Earnings

Alphabet and Tesla Earnings Released After Market Close
Big Tech Earnings Drive Stock Movement
Q2 GDP and June PCE to Be Released on 25-26

The three major indices of the U.S. New York stock market showed mixed movements in the early session on the 23rd (local time), hovering around the flat line. As companies continue to release their second-quarter earnings, investors are adopting a wait-and-see stance, anticipating the earnings reports of Alphabet, Google's parent company, and Tesla, which are scheduled to be announced after the market closes.

[Image source=Yonhap News]

As of 9:37 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average was down 0.13% from the previous close, standing at 40,364.92. The S&P 500, which is centered on large-cap stocks, was up 0.02% at 5,565.56, while the tech-heavy Nasdaq Composite was trading 0.04% higher at 18,015.42.

By individual stocks, General Motors (GM) is declining despite reporting better-than-expected second-quarter earnings. The news of restructuring its underperforming autonomous driving and China businesses is believed to have weighed on investor sentiment. Spotify Technology and Coca-Cola, which posted earnings exceeding market expectations, are rising by 12.23% and 1.62%, respectively. UPS is plunging 12.4% due to weak sales and net income.

The market is closely watching the earnings reports of Alphabet and Tesla released on this day. According to Wall Street estimates, Alphabet is expected to have posted second-quarter revenue of $83.4 billion and net income of $22.9 billion, representing increases of 13% and 50%, respectively, compared to the same period last year. Tesla's second-quarter revenue is expected to be $24.9 billion, roughly the same as a year ago, while net income is estimated to have fallen 36% to $1.7 billion. The upcoming big tech earnings, starting with these two companies, are expected to influence the future trend of technology stocks. Next week, earnings reports from other Magnificent Seven companies such as Microsoft (MS) and Apple will follow.

With growing expectations for a rate cut in September, there is speculation that a rotation trade will continue, with buying momentum shifting from large-cap to small-cap stocks. Larry Tentarelli, Chief Technical Strategist at Blue Chip Daily Trends Report, said, "This rotation story remains valid," adding, "If we receive positive inflation reports, small-cap stocks and bank stocks will rally further."

On the 26th, the U.S. Federal Reserve (Fed) will release the June Personal Consumption Expenditures (PCE) price index, which could lay the groundwork for a rate cut. The core PCE price index, which excludes volatile food and energy prices, is expected to have risen 0.1% month-over-month. Accordingly, the core PCE inflation rate for the second quarter is likely to have remained below the Fed's 2% target. On the day before, the 25th, the preliminary GDP growth rate for the second quarter is scheduled to be released. The growth rate is expected to have recorded an annualized 1.9% quarter-over-quarter increase, up from 1.4% in the first quarter. If the second-quarter growth rate comes in around 2%, it will bolster expectations for a soft landing of the U.S. economy.

The market has largely priced in a September rate cut amid signs of declining inflation, cooling labor markets, and slowing growth. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market currently reflects a 96.1% probability that the Fed will cut rates by at least 0.25 percentage points at the September FOMC meeting.

U.S. Treasury yields are moving sideways. The 10-year U.S. Treasury yield, a global benchmark for bond yields, fell 1 basis point (1 bp = 0.01 percentage points) from the previous trading day to 4.24%. The 2-year Treasury yield, which is sensitive to monetary policy, is trading around 4.51%, unchanged from the previous day.

International oil prices are declining amid hopes for a ceasefire negotiation between Israel and the Palestinian militant group Hamas. West Texas Intermediate (WTI) crude oil is down $0.39 to $78.01 per barrel, while Brent crude, the global oil price benchmark, is trading $0.39 lower at $82.01 per barrel.