US Stock Market Update: Falling Indices, Rising Interest Rates, and Pharmaceutical Companies Lead Dow Jones

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This is how the trading day ended for the most trend-setting Wall Street indices:

S&P 500 fell 0.7 percent Dow Jones Industrial Average rose 0.5 percent Nasdaq Composite fell 2.1 percent

The market players thus put the brakes on after all three indices have risen sharply earlier this week. All three have generally risen strongly this year, and this week the indices were close to their highest levels since April 2022.

The ten-year interest rate rose after strong unemployment figures

Besides a couple of weak quarterly reports from major tech companies, the fall for the US stock market on Thursday is attributed to a new, strong labor market report.

Bloomberg highlights an unexpected drop in the number of jobless claimants, to the lowest level in two months. These figures are reported weekly.

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At the same time, figures for repeated applications for such social security showed the biggest rise in over three months.

In any case, the report points in the direction of a strong labor market, and despite the fact that wage growth has slowed in recent months, several market players draw the line all the way to a new interest rate increase from the Fed.

The yield on the “ten-year”, US government bonds with a maturity of ten years, also climbed 11 basis points to 3.85 percent on Thursday evening.

Pharmaceutical companies pulled up the Dow Jones

Part of the reason why the Dow Jones was the only one of the three indices to rise is attributed to the pharmaceutical company Johnson & Johnson’s share price growth of just under six per cent.

It came after the company reported revenue and earnings per share in the second quarter that both exceeded expectations, and when the stock rose that much, it pulled the entire Dow Jones up – the index only includes 30 companies.

It also means that the Dow Jones has risen for nine trading days in a row, for the first time since 2017.

Tek-fall by quarterly figures

In the US stock market, there were a number of companies that particularly stood out on Thursday: Tesla fell 9.7 percent after market participants were allowed to trade the stock after poring over the quarterly report for half a day.

The company delivered quarterly figures late on Wednesday evening, where it was revealed, among other things, that margins have taken a hit after juicy price cuts earlier this year.

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Despite the fact that the turnover is higher than ever, and greater than the analysts expected, the share was thus punished on the stock exchange.

At the investor conference following the presentation of the report, Musk and the rest of the management were unable to give clear answers on either the specifications or the delivery date for the Cybertruck.

Netflix also fell heavily, releasing quarterly figures a few minutes before Tesla late on Wednesday evening. The electricity giant reports more new subscribers than expected, but at the same time the guidance for future earnings disappointed. The share price was down 8.4 percent.

15 companies explain most of the rise

Although Thursday ended a bit shaky for the US stock market, it has nevertheless had a solid upward journey so far this year.

The industry-dominated Dow Jones recovered much of what was lost from the downturn in 2022 as early as the autumn of last year, while the S&P 500 and above all the tech-oriented Nasdaq Composite have soared upwards partly driven by AI euphoria in 2023.

The S&P 500 has risen by just under 19 per cent so far in 2023, while the Nasdaq Composite can boast an increase of around 35 per cent.

The rise is also concentrated on a small number of very large companies: the 15 largest companies on the S&P 500 have risen by an average of 35 per cent, while the median company on the same index by comparison has risen by four per cent.

Strategist at Aegon Asset Management, Cameron McCrimmon, takes this as a sign of an “aging bull”, i.e. a market at the end of a bull cycle.

The term “bull” is used for a market characterized by an upturn, allegedly because the graph of, for example, a stock index in a bull market moves upwards from left to right, like the back of a bull.

In the opposite case, in falling markets, the term “bear” is used – again with reference to the shape of the bear’s back.

TSMC gets on the hump for falling demand

Chip manufacturer TSMC, for its part, delivered quarterly figures before the stock exchanges opened on Thursday, and the quarterly report revealed a turnover drop of ten percent from the second quarter of last year.

Both the top and bottom line fairly beat the expectations of the analyst team, but the bottom line shrank for the first time since the same quarter in 2019.

TSMC, which stands for Taiwanese Semiconductor Manufacturing Company, is one of the world’s leading manufacturers of the most advanced processors, and can be found in phones and PCs from Apple, among other things.

And the market for such electronics has weakened significantly since the pandemic – and this is cited as an explanation behind the weak quarterly result, writes CNBC.

Electronics manufacturers went out of their way to secure microchips during the pandemic, of which there was sometimes a great shortage, but the same companies are now struggling with the ketchup effect and full inventories after consumers have tightened their wallets to a greater extent.

Even the demand for hardware components used for training AI models is not enough to offset this.

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