[New York Stock Market] Slight Decline Awaiting Big Tech Earnings... Alphabet Performs Well, Tesla Disappoints

Alphabet's Earnings Expected to Surpass Estimates... Tesla Falls Short
Focus on Q2 GDP and June PCE on 25-26th

The three major indices of the U.S. New York stock market closed slightly lower on the 23rd (local time). As companies continue to release their second-quarter earnings, investors adopted a cautious stance, awaiting the earnings reports of Alphabet, Google's parent company, and Tesla.

On this day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 40,358.09, down 57.35 points (0.14%) from the previous trading day. The large-cap-focused S&P 500 index fell 8.67 points (0.16%) to 5555.74, and the tech-heavy Nasdaq index dropped 10.22 points (0.06%) to close at 17,997.35.

The market maintained a wait-and-see stance, focusing on the earnings reports of Alphabet and Tesla, which were released after the market closed.

Greg Basuk, CEO of AXS Investments, analyzed, "The holding pattern reflects investors digesting earnings, economic indicators, and the U.S. political situation comprehensively. These factors will influence investor movements over the coming weeks."

[Image source=Yonhap News]

On this day, Tesla reported earnings after the market closed that fell short of market expectations. According to Tesla, second-quarter earnings per share (EPS) were $0.52, and revenue was $25.5 billion. While revenue exceeded expectations, EPS fell below forecasts. Earlier, market research firm LSEG had projected Tesla's second-quarter EPS at $0.62 and revenue at $24.77 billion.

On the other hand, Alphabet's earnings surpassed expectations. Alphabet announced second-quarter revenue of $84.74 billion and EPS of $1.89. This exceeded Wall Street's forecasts of $84.19 billion in revenue and $1.84 EPS. By segment, YouTube advertising revenue was $8.66 billion, below the expected $8.93 billion, but Google Cloud revenue was $10.35 billion, surpassing the forecast of $10.2 billion.

With the earnings of the two companies diverging, as of 4:36 p.m. Eastern Time in after-hours trading, Tesla was down 2.77%, while Alphabet was up 2.33%.

Photo by AP News

Next week, earnings reports from other Magnificent Seven companies such as Microsoft (MS) and Apple will follow. The future trend of tech stocks is expected to be influenced by the earnings of major big tech companies.

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. The Russell 2000 index, composed of small- and mid-cap stocks, rose 1.02% compared to the previous trading day. Larry Tentarelli, Chief Technical Strategist at Blue Chip Daily Trends Report, said, "This rotation story remains valid. If we receive positive inflation reports, small-cap stocks and bank stocks will rise further."

Investors' attention is now focused on the preliminary second-quarter Gross Domestic Product (GDP) growth rate to be announced on the 25th and the June Personal Consumption Expenditures (PCE) price index to be released on the 26th. The core PCE price index, which excludes volatile food and energy prices, is expected to have risen 0.1% month-over-month. Accordingly, it is anticipated that the second-quarter core PCE inflation rate fell below the Fed's target of 2%. The second-quarter GDP growth rate is expected to record an annualized 1.9% quarter-over-quarter increase, lending more weight to the soft landing outlook.

The market is taking the decline in inflation, cooling of the labor market, and signs of slowing growth as a given for a rate cut in September. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on this day reflected a 96.1% probability that the Fed will cut rates by at least 0.25 percentage points at the September FOMC meeting.

By individual stocks, General Motors (GM) fell 6.42% despite reporting better-than-expected second-quarter earnings. The news of restructuring its underperforming autonomous driving and China businesses weighed on investor sentiment. Spotify Technology and Coca-Cola rose 11.96% and 0.29%, respectively, after posting earnings that exceeded market expectations. UPS plunged 12.05% due to weak revenue and net income.

U.S. Treasury yields remained steady. The 2-year U.S. Treasury yield, sensitive to monetary policy, fell 2 basis points (1 bp = 0.01 percentage points) to 4.49%, while the 10-year U.S. Treasury yield, a global bond yield benchmark, traded around 4.25%, unchanged from the previous day.

International oil prices fell amid hopes for a ceasefire negotiation between Israel and the Palestinian militant group Hamas and concerns over weakening demand in China. West Texas Intermediate (WTI) crude oil closed at $76.96 per barrel, down $1.44 (1.8%) from the previous day, while Brent crude, the global oil price benchmark, ended at $81.01 per barrel, down $1.39 (1.7%).