Digesting Corporate Earnings: Tesla and IBM Decline
Bargain Hunting Flows into Tech Stocks; Expectations for M7 Results
Focus on U.S.-China Trade Agreement; International Gold Prices Rise Over 2%
All three major indices of the New York Stock Exchange in the United States rose simultaneously on the 23rd (local time). The market is attempting a rebound as bargain hunting flows in, especially among technology stocks. International oil prices are surging by nearly 5% after the Donald Trump administration imposed sudden sanctions on two major Russian oil companies for their passive stance on ending the war in Ukraine. International gold prices are also on the rise.
On the 22nd (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
As of 11:13 a.m. on the same day at the New York Stock Exchange, the blue-chip-focused Dow Jones Industrial Average was up 19.46 points (0.04%) from the previous trading day, standing at 46,609.87. The large-cap-centered S&P 500 Index rose 19.21 points (0.29%) to 6,718.61, while the tech-heavy Nasdaq Index jumped 132.467 points (0.58%) to 22,872.863.
By sector, technology stocks are particularly strong. Nvidia is up 0.97%. Broadcom and Amazon are showing gains of 1.7% and 1.06%, respectively. In contrast, Tesla is down 2.27% following a disappointing third-quarter earnings report the previous day. The company achieved record quarterly revenue of $28.095 billion in the third quarter, an 11.6% increase year-on-year, but net profit plunged 36.8% to $1.373 billion over the same period. IBM outperformed Wall Street expectations in its earnings, but software (SW) revenue was only in line with forecasts, leading to a 3.54% decline.
Investors are digesting corporate earnings and attempting a rebound. The so-called 'Magnificent 7 (M7)' large technology companies, whose earnings season began with Tesla's report, are being closely watched as investors look for clues to a potential recovery. Analysts say the continuation of the stock market rally depends on the performance of these companies.
The possibility of easing U.S.-China trade tensions is also a key focus for the market. President Trump stated the previous day that he would proceed as scheduled with a summit meeting with Chinese President Xi Jinping, and the two leaders will meet next week on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in Gyeongju, South Korea. President Trump's remarks have somewhat alleviated concerns about escalating trade tensions between the two countries.
Earlier on the same day, concerns over trade tensions were reignited following news that the United States is considering export controls on products containing U.S. software (SW) technology to China. U.S. Treasury Secretary Scott Besant said the previous day, "Everything is on the table," adding, "Whether it's software, engines, or anything else, if export controls are implemented, we will cooperate with our Group of Seven (G7) allies." This is a countermeasure to China's rare earth export controls targeting the United States. However, he left room for easing tensions, saying that trade negotiations with China are being conducted "with good intentions" and "great respect."
Chris Grisanti, Chief Market Strategist at MAI Capital Management, commented, "This is a particularly stressful time in the market," and added, "Valuations are at their second highest in 100 years. The market is strong and momentum is there, but valuations remain high." Referring to the dot-com bubble around 2000, he said, "History doesn't repeat itself, but it often rhymes," and noted, "We're seeing meme stocks and companies pricing in forecasts for 2030 or even 2035. It's eerie that similar things happened in 1998 and 1999."
The market is closely watching the Consumer Price Index (CPI) for September, which will be released on the 24th. Experts expect last month's CPI to have risen 3.1% year-on-year, an increase from the 2.9% rise in August. The U.S. Federal Reserve (Fed) plans to decide whether to cut interest rates at the upcoming Federal Open Market Committee (FOMC) meeting on the 28th and 29th, based on this inflation data 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 oil prices are surging by about 5% following news of U.S. sanctions on Russia. As of this morning, West Texas Intermediate (WTI) crude oil was trading at $61.64 per barrel, up $3.14 (5.37%) from the previous session, and Brent crude, the global oil price benchmark, was trading at $65.72 per barrel, up $3.13 (5.0%) from the previous day. This is due to the Trump administration's sanctions on two major Russian oil companies for their passive stance on ending the war in Ukraine.
International gold prices are also soaring. On the New York Mercantile Exchange (COMEX), December gold futures are trading at $4,165 per ounce, up 2.45% from the previous day.
Government bond yields are also on the rise. The yield on 10-year U.S. Treasury bonds is at 3.99%, and the yield on 2-year U.S. Treasury bonds is at 3.47%, up 4 basis points (1bp=0.01 percentage point) and 3 basis points from the previous day, respectively.
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