This week (11th-14th), the New York Stock Exchange is expected to pay attention to the consumer price index (CPI) in March and the resulting government bond interest rate movement.
This is because the 10-year government bond rate surpassed 2.7% last week, hitting a new high since March 2019. The 10-year interest rate rose more than 30 bp (=0.30 percentage point) in a week.
A steep rise in interest rates will hurt companies’ expected future earnings and adversely affect growth and technology stocks, especially those with high valuations.
If interest rates rise further in the CPI announcement, the impact on the stock market could also increase. However, there is a possibility that a relief rally will appear, given that the market has reflected some concerns about austerity in the price.
In particular, given that the Nasdaq index has fallen about 15% from its high recorded in November last year, there is a possibility that the low-point buying trend will revive.
It is also noteworthy that bank stocks’ quarterly results will be announced this week.
Starting with the performance of JP Morgan Chase and Black Rock on the 13th, companies’ performance in the first quarter will be announced.
The results of Citigroup, Wells Fargo, Morgan Stanley and Goldman Sachs will also be announced on the 14th.
According to Refinitiv, companies listed on the S&P 500 Index are expected to see their net profit increase 6.1 percent in the first quarter of this year from the same period last year, while their financial sector’s net profit is expected to fall 22.9 percent.
The sluggish performance of bank stocks is due to a significant decrease in investment banking (IB) activities due to market uncertainties stemming from Russia’s attack on Ukraine, and the issue of the reversal of loan-loss reserves deposited during the COVID-19 Pandemic has also disappeared.
If companies’ performances are sluggish, concerns about future economic recovery could also grow.
The geopolitical tensions surrounding Ukraine and Russia and the continued Western sanctions are also a burden on the stock market.
