[New York Stock Exchange] S&P and Nasdaq Hit New Highs on Alphabet-Led AI Optimism, Dow Drops 0.7%

Alphabet's Surprise Q2 Results Boost the Market
US Nears Trade Deal With EU After Japan
Trump to Visit Fed Headquarters to Pressure Powell
PIMCO: "Undermining Fed Independence Would Harm the Market"
New Jobless Claims Fall for Sixth Straight Week

On July 24 (local time), both the S&P 500 and Nasdaq indices on the New York Stock Exchange once again set new all-time highs. The surprise earnings announcement by Alphabet, Google's parent company, fueled optimism about artificial intelligence (AI), driving up related stocks across the board. Additionally, news that the United States is nearing a trade agreement with the European Union (EU), following a similar deal with Japan, further boosted investor sentiment.

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On this day, the blue-chip Dow Jones Industrial Average closed at 44,693.91, down 316.38 points (0.7%) from the previous session. The large-cap S&P 500 index rose 4.44 points (0.07%) to 6,363.35, and the tech-heavy Nasdaq index gained 37.94 points (0.18%) to finish at 21,057.96. Both the S&P 500 and Nasdaq set new record highs for the fourth and second consecutive trading days, respectively.

By stock, Alphabet rose 0.88%. The previous day, the company reported second-quarter revenue of $96.43 billion and earnings per share (EPS) of $2.31, exceeding market expectations compiled by LSEG (revenue of $94 billion and EPS of $2.18). Driven by AI optimism, Nvidia rose 1.73%. Microsoft (MS) and Meta, Facebook's parent company, saw their share prices increase by 0.99% and 0.17%, respectively. In contrast, Tesla, which reported earnings below expectations the previous day, plunged 9.11%. Tesla posted second-quarter revenue of $22.496 billion and EPS of $0.40, both falling short of forecasts ($22.74 billion and $0.43, respectively). IBM also declined 7.62% as its second-quarter software revenue missed market expectations.

Although there are growing concerns about a stock market bubble due to the recent rally and tariff uncertainties, there are also strong expectations that the bull market will continue for the time being.

Ross Mayfield, investment strategist at Baird, analyzed, "Given the scale and influence of big tech and AI, Alphabet's earnings provided good material for a market that constantly questions whether AI spending can continue to deliver strong investment returns," adding, "At least in the early part of the earnings season, Alphabet offered positive signals with solid data."

Andrew Tyler, head of global market intelligence at JPMorgan Chase, observed, "There is not yet a consensus on the bull market, but even those who expected a bear market are now acknowledging their misjudgment, based on conversations with clients."

Reports that a trade agreement between the US and the EU is imminent also helped drive the market higher. The previous day, the Financial Times (FT) reported that both sides are close to a deal imposing a 15% reciprocal tariff on EU-made products. This is the same level as the 15% tariff accepted by Japan. It is also reported that there are discussions to lower the tariff on automobiles from the current 27.5% to 15% for each category.

Investors were also awaiting President Trump's scheduled visit to the Federal Reserve (Fed) headquarters at 4 p.m. after the market closed. This will be the first official visit by a sitting president to the central bank in about 20 years, since President George W. Bush. As President Trump has repeatedly pressured Fed Chair Jerome Powell to cut interest rates, it is expected that he will further intensify this pressure during the visit, drawing attention to his public remarks.

Regarding this, Dan Ivascyn, Chief Investment Officer (CIO) of PIMCO, the world's largest bond manager, said in an interview with the FT, "Attempts to undermine the independence of the central bank would be very harmful to the market," emphasizing, "From the perspective of the bond market, it is important that positive signals continue to emerge indicating that Chair Powell can serve out his full term."

With employment indicators remaining strong, President Trump's pressure for a rate cut is unlikely to gain traction. According to the US Department of Labor, new unemployment claims for the week of July 13-19 totaled 217,000. This is the lowest since mid-April this year, down 4,000 from the previous week (221,000) and below the expert forecast of 227,000. As a result, new unemployment claims have declined for six consecutive weeks, marking the longest downward trend since 2022.

Chris Larkin, managing director at Morgan Stanley E*TRADE, pointed out, "There are still very few signs of serious cracks in the labor market," adding, "If this situation continues, the Fed will have one less reason to cut rates."

Yields on US Treasury bonds are on the rise. The yield on the 10-year US Treasury, the global benchmark for bond yields, rose by 1 basis point (1bp=0.01 percentage point) from the previous session to 4.4%. The yield on the 2-year US Treasury, which is sensitive to monetary policy, rose by 3 basis points to 3.92%.