S&P and Nasdaq Weaken After Hitting Record Highs
Focus on Alphabet and Tesla Earnings on the 23rd
US Treasury: "Trade Talks with China on July 28-29"
Discussion on Extending 115 Percentage Point Tariff Reductions
The three major indices on the New York Stock Exchange showed mixed movements in early trading on the 22nd (local time). As investors kept a close eye on corporate earnings reports and news about US-China trade negotiations, the S&P 500 and Nasdaq indices appeared to be taking a breather after reaching record highs the previous day.
As of 10:46 a.m. on the same day in the New York stock market, the blue-chip Dow Jones Industrial Average (Dow) was up 33.39 points (0.08%) from the previous trading day, standing at 44,356.46. The large-cap S&P 500 index was down 7.6 points (0.12%) at 6,298, while the tech-heavy Nasdaq index was down 90.3 points (0.43%) at 20,883.88.
On the previous day, the S&P 500 and Nasdaq indices rose by 0.14% and 0.38%, respectively, setting new all-time highs. Optimism over big tech earnings and the possibility of an extension of tariff suspensions drove the market upward.
The main focus of the market this week is the earnings reports of major companies. The earnings of Alphabet, Google’s parent company, and Tesla, which will be released on the 23rd, are the biggest highlights. In particular, attention is focused on the messages companies will deliver regarding demand and spending on artificial intelligence (AI). The future direction of the stock market is expected to be determined by the big tech earnings announcements starting this week. The earnings season, which began last week, has been smooth so far. According to market research firm FactSet, 88 S&P 500 companies have reported earnings so far, and 82% of them have exceeded analyst expectations.
On Wall Street, there are mixed views, with some pointing out that current valuations are high, while others see room for further gains.
Goldman Sachs analyzed, "The market may have risen too far, too fast," and added, "The S&P 500 index plunged to 4,982 after the 'Liberation Day' (the date of the reciprocal tariff announcement in April), but then rebounded sharply. The earnings outlook for 2025 has been nearly halved, yet this recovery is the fastest in almost 50 years."
On the other hand, Christopher Harvey, head of equity strategy at Wells Fargo, predicted that the S&P 500 index would rise by double digits in the second half of the year. In an interview with Bloomberg the previous day, Harvey said, "Winners continue to win, as mega-cap companies are seeing higher margins and expanding market share," and added, "The growth trend in the AI sector will continue for the long term."
Progress in tariff negotiations is also drawing attention. US Treasury Secretary Scott Besant announced that the third round of high-level trade negotiations with China will be held in Stockholm, Sweden, on July 28-29 (local time), and that the extension of ultra-high tariff reduction measures will be discussed. In an interview with Fox Business that day, he stated regarding the previous US-China tariff reduction measures, "That agreement expires on August 12," and added, "We plan to discuss the possibility of an extension with the Chinese side." Previously, in the first round of negotiations held in Geneva, Switzerland, in May, the two countries each reduced tariffs by 115 percentage points, resulting in the US applying a 30% tariff rate and China a 10% rate. In this round of negotiations, the main issue is expected to be the extension of these measures, which were implemented temporarily for 90 days. Secretary Besant also mentioned the possibility of a series of trade agreements being reached with major countries ahead of the expiration of the reciprocal tariff suspension measures on August 1.
US Treasury yields are declining, mainly in long-term bonds. The 10-year US Treasury yield, the global benchmark for bond yields, was down 3 basis points (1bp = 0.01 percentage point) from the previous trading day, standing at 4.34%. The 2-year US Treasury yield, which is sensitive to monetary policy, was down 1 basis point from the previous day, at 3.83%.
By stock, Lockheed Martin fell 5.37% after reporting second-quarter earnings that missed market expectations. Philip Morris was also down 7.2% after reporting results below market forecasts. Nvidia was down 2.36%. Apple was up 0.4%, and Tesla was up 0.18%.
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