[New York Stock Exchange] Dow Hits Record High on Strong Corporate Earnings... Gold Prices Plunge

Coca-Cola, 3M, GM and Others Beat Third-Quarter Earnings Expectations
"M7" Profits Expected to See Double-Digit Growth Driven by AI Expansion
Gold Prices Plunge... Safe-Haven Demand Weakens Ahead of US-China Summit

The three major indices of the U.S. stock market closed mixed on October 21 (local time). As investors digested solid corporate earnings, the Dow Jones Industrial Average reached an all-time high. International gold prices fell by more than 5% as expectations of easing U.S.-China trade tensions weakened the preference for safe-haven assets.

On the 20th (local time), a trader is working on the trading floor of the New York Stock Exchange (NYSE) in the United States. Photo by AFP Yonhap News

On this day, the blue-chip Dow Jones Industrial Average closed at 46,924.74, up 218.16 points (0.47%) from the previous trading day, setting a new all-time high. The S&P 500 Index, which focuses on large-cap stocks, rose by 0.22 points (less than 0.1%) to 6,735.35. The tech-heavy Nasdaq Index ended the session at 22,953.666, down 36.877 points (0.16%).

By sector, companies that posted strong earnings led the gains. Coca-Cola rose 4.06% after reporting third-quarter results that beat market expectations. 3M also jumped 7.66% on strong earnings. General Motors (GM) surged 14.86% as its earnings exceeded expectations and its annual earnings outlook was raised. In particular, buying interest increased after GM lowered its projected tariff impact for the year by 35%, adjusting it from the previous range of $4 billion-$5 billion to $3.5 billion-$4.5 billion.

Apple, after climbing 3.94% to a record high the previous day, added another 0.2% on this day. Zions Bancorporation and Western Alliance, which were at the center of last week’s concerns over regional bank loan defaults, rose 1.27% and 1.13%, respectively.

Louis Navellier, founder and Chief Investment Officer (CIO) of Navellier & Associates, analyzed, “It is a good sign that large global companies are reporting better-than-expected earnings,” adding, “The third-quarter earnings season has had a strong start, and the upward trend is likely to continue through the end of the year.”

Early in the earnings season, corporate results have been generally strong. According to financial information provider FactSet, about three-quarters of S&P 500-listed companies that have reported so far have posted results exceeding market expectations. The profits of the so-called “Magnificent 7” (M7) large technology companies are expected to increase by 14.9% year-on-year, driven by growth in artificial intelligence (AI). This is about twice the average earnings growth rate (6.7%) of the other 493 companies.

Investors are also paying attention to the U.S.-China summit scheduled for next week. There is a growing focus on the possibility of a trade agreement being reached during the bilateral talks at the Asia-Pacific Economic Cooperation (APEC) summit in Gyeongju, South Korea. U.S. President Donald Trump said he “expects to reach a good agreement” with Chinese President Xi Jinping, but also noted that the meeting might not take place, leaving some caution in the market.

The prospect of additional interest rate cuts by the U.S. Federal Reserve (Fed) is supporting investor sentiment. The Fed lowered its benchmark interest rate to 4.0-4.25% per annum last month and will decide on further cuts at the upcoming Federal Open Market Committee (FOMC) meeting on October 28-29. According to CME FedWatch, as of this day, the probability that the Fed will cut rates by an additional 0.25 percentage points in October stood at 98.9%.

The Consumer Price Index (CPI) for September, which will influence the Fed’s rate decision, is scheduled to be released on October 24. Last month’s CPI is expected to have risen by 3.1% year-on-year, a slightly larger increase than August’s 2.9%.

U.S. Treasury yields were little changed. The yield on the 10-year Treasury note fell by 2 basis points (1bp = 0.01 percentage point) from the previous session to 3.96%, while the yield on the 2-year Treasury note remained at 3.45%.

Meanwhile, as the possibility of a U.S.-China trade agreement increased, the preference for safe-haven assets weakened, causing gold prices to plunge. On the New York Mercantile Exchange, the spot price of gold was down 5.44% from the previous day, trading at $4,138.3 per ounce as of 5:02 p.m.