[New York Stock Market] Mixed Close Amid Cautious Trading Ahead of Earnings Announcements... Sharp Rise in Treasury Yields

Entering Earnings Season 'Taking a Breather'
Tesla, Amazon, and Others Report Earnings This Week
Nvidia Surges Over 4%, Hits Record High
Fed Officials Signal Gradual, Moderate Rate Cuts
Bond Yields Spike Amid Expectations of Slower Rate Cut Pace

The three major indices of the U.S. New York Stock Exchange closed mixed on the 21st (local time). After the Dow Jones Industrial Average and the S&P 500 continued their six-week winning streak last week, the market entered a 'breather' phase awaiting corporate earnings reports scheduled for this week. The sharp rise in U.S. Treasury yields also limited investor sentiment.

On this day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average closed at 42,931.6, down 344.31 points (0.8%) from the previous trading day. The large-cap-focused S&P 500 fell 10.69 points (0.18%) to 5,853.98, while the tech-heavy Nasdaq Composite rose 50.45 points (0.27%) to close at 18,540.01.

By individual stocks, AI leader Nvidia surged 4.14% from the previous day to close at $143.71 per share, setting a new all-time high once again. Boeing rose 3.11% after tentatively agreeing with its union to increase wages by 35% over the next four years. Eyewear retailer Warby Parker jumped 9.84% after investment bank Goldman Sachs upgraded its rating from 'neutral' to 'buy.' The Walt Disney Company fell 0.68%. On this day, the company announced the appointment of James Gorman, CEO of Morgan Stanley, as the new board chairman. Gorman stated that he would begin the search for a successor CEO ahead of Bob Iger's contract expiration in 2026. Tesla, which is scheduled to release earnings this week, declined 0.84%.

The market is focusing on corporate earnings to be released this week. Earnings from Tesla, Amazon, Boeing, General Motors (GM), and Coca-Cola are expected to be disclosed. The flow of upcoming corporate earnings is anticipated to influence the future direction of the stock market.

Mariya Baytman, Senior Multi-Asset Strategist at State Street Global Markets, analyzed, "Stocks have been strong since early October, mainly supported by improved economic indicators and global central banks' easing monetary policies. It is not surprising that investors are discussing corporate profits and unwinding (buy) positions ahead of a busy earnings week."

The remarks by Federal Reserve (Fed) officials on moderating the pace of rate cuts also weighed on investor sentiment.

Neel Kashkari, President of the Federal Reserve Bank of Minneapolis

Neel Kashkari, President of the Minneapolis Federal Reserve Bank, attending an event in Wisconsin, said, "I expect more gradual rate cuts over the next few quarters to reach a neutral rate level," adding that for the pace of rate cuts to accelerate, "there must be substantial evidence that the labor market is weakening rapidly." On the same day, Lorie Logan, President of the Dallas Fed, speaking at an event in New York, stated, "If the economy moves as expected, a strategy of gradually lowering the policy rate to a more normal or neutral level will help manage risks and achieve goals." She reiterated the Fed's stance that rate cuts should be made cautiously. These Fed officials' comments are interpreted as signaling the need to moderate the pace of rate cuts following recent signs of economic growth driven by strong labor markets and consumer spending.

Expectations that the pace of rate cuts may slow have caused Treasury yields to surge. The U.S. 10-year Treasury yield, a global bond yield benchmark, rose 11 basis points (1bp=0.01 percentage point) to 4.19%, while the 2-year Treasury yield increased 7 basis points to 4.02% compared to the previous day.

The market also expects the Fed to opt for a 0.25 percentage point rate cut instead of a 'big cut' (0.5 percentage point) at the Federal Open Market Committee (FOMC) meeting scheduled for November 6-7. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market currently prices in an 87.1% probability of a 0.25 percentage point rate cut in November, up significantly from 49.6% a month ago. The probability of a 0.5 percentage point cut has plummeted from 50.4% to 0% during the same period, effectively eliminating that possibility.

Sam Stovall, Chief Investment Strategist at CFRA, analyzed, "The continued rise in bond yields indicates that investors believe the U.S. economy remains resilient and that the Fed will slow the pace of rate cuts," adding, "As a result, the Fed is likely to face difficulties in bringing inflation down to the 2% target next year."

International oil prices, which had plunged more than 7% last week, rose as concerns over reduced demand from China and supply disruptions due to Middle East instability eased. West Texas Intermediate (WTI) crude oil closed at $70.56 per barrel, up $1.34 (1.94%) from the previous day, while Brent crude, the global oil price benchmark, rose $1.23 (1.68%) to $74.29 per barrel.