[New York Stock Exchange] All Major Indices Fall Amid Rising U.S.-China Tensions... U.S. Considers Software Export Controls to China

Reuters: "U.S. Considering Export Controls on Domestic Software to China"
Tensions Rise Ahead of Next Week's U.S.-China Summit
Netflix and Texas Instruments Disappoint with Weak Earnings
International Gold Prices Stabilize After Previous Day's P

On October 22 (local time), all three major U.S. stock indexes closed lower. News that the United States is considering export restrictions to China on products incorporating American software technology reignited concerns over U.S.-China trade tensions. In addition, disappointing earnings from several companies, including Texas Instruments following Netflix, weighed on investor sentiment. Although international gold prices had plunged more than 5% the previous day, they remained flat on this day.

On the 20th (local time), traders are working on the trading floor of the New York Stock Exchange (NYSE) in the United States. Photo by Reuters Yonhap News

On this day at the New York Stock Exchange, the blue-chip Dow Jones Industrial Average closed at 46,590.41, down 334.33 points (0.71%) from the previous trading day. The large-cap S&P 500 Index fell by 35.95 points (0.53%) to 6,699.4, while the tech-heavy Nasdaq Index dropped 213.27 points (0.93%) to close at 22,740.396.

The possibility of additional U.S. export controls to China acted as a negative factor. Reuters reported, citing multiple sources, that the administration of President Donald Trump is considering restricting exports to China of products made using U.S. software. Laptops and jet engines are reportedly among the items under consideration. This move is seen as a response to China's rare earth export controls. However, sources noted that these measures may not actually be implemented. With the U.S.-China summit scheduled for next week, both countries are continuing to posture against each other. President Trump stated the previous day that the summit would proceed as planned but also mentioned the possibility of cancellation, heightening tension until the last minute.

Investors digested corporate earnings and closely watched Tesla's earnings announcement scheduled after the market close. Tesla reported third-quarter revenue of $28.1 billion and adjusted earnings per share (EPS) of $0.50. Compared to analysts' expectations (revenue of $26.37 billion and adjusted EPS of $0.54), revenue exceeded forecasts, but net income fell slightly short.

With Tesla kicking off the earnings season for the so-called "Magnificent 7" (M7) large technology companies, the market is watching whether their performance will inject new energy into the stock market. According to financial data provider FactSet, M7's third-quarter profits are expected to rise 14.9% year-on-year, driven by the growth of artificial intelligence (AI). This is more than double the average profit growth rate (6.7%) of the other 493 S&P 500 companies.

Bespoke Investment Group commented on the market decline, saying, "At least temporarily, it seems as if the music has stopped and the party is over for the most speculative stocks," adding, "We don't know when a recovery will come, but usually, the higher the mountain, the deeper the valley."

On the other hand, some expect that if large tech companies deliver better-than-expected results, their stock prices could rise further.

Alicia Levine, Head of Investment Strategy and Equities at BNY Wealth, analyzed, "Ultimately, if earnings exceed expectations and tech stocks prove the resilience of AI, the market could move to a higher level," adding, "The S&P 500 Index needs to break through the 6,800 mark to confirm the next stage of the rally, and there is a high likelihood of reaching that level both technically and fundamentally."

On October 24, the Consumer Price Index (CPI) for September will be released. The market expects last month's CPI to have risen 3.1% year-on-year, a slightly higher increase than August's 2.9%. The Federal Reserve is set to decide whether to cut interest rates at the Federal Open Market Committee (FOMC) regular meeting on October 28-29, based on these inflation indicators and labor market conditions. Last month, the Fed lowered its benchmark interest rate by 0.25 percentage points to a range of 4.0-4.25%.

International gold prices remained flat. On the New York Mercantile Exchange (COMEX), December gold futures were trading at $4,113.34 per ounce, up 0.1% from the previous day.

U.S. Treasury yields also showed little change. The yield on the 10-year Treasury note stood at 3.95%, and the yield on the 2-year Treasury note was 3.44%, both down 1 basis point (1bp = 0.01 percentage point) from the previous day.

Stock prices diverged by company following earnings announcements. Netflix plunged 10.07% after reporting third-quarter results that missed market expectations after the previous day's close. Texas Instruments also ended down 5.6% due to weak earnings. Robotic surgery equipment company Intuitive Surgical surged 13.89% as its third-quarter results beat forecasts. U.S. plant-based meat company Beyond Meat, which benefited from the "meme stock" craze with stocks gaining short-term attention on online communities, saw its stock fluctuate sharply before closing down 0.55%. Recently, Beyond Meat was newly included in the meme stock exchange-traded fund (ETF) managed by Roundhill Investments, drawing strong buying interest.