The New York stock market fell on fears of prolonged tightening and recession… Dow 1%↓ close
(New York = Yonhap News) Correspondent Yoon Young-sook of Yonhap Infomax = The New York stock market may see the Federal Reserve (Fed) tightening may last longer than expected given that US employment and consumption are still strong, which raises the risk of an economic recession. It declined due to concerns that it might grow.
At the New York Stock Exchange (NYSE) on the 6th (US Eastern time), the Dow Jones 30 Industrial Average closed at 33,596.34, down 350.76 points (1.03%) from the battlefield.
The Standard & Poor’s (S&P) 500 index closed at 3,941.26, down 57.58 points (1.44%) from the battlefield, and the Nasdaq closed at 11,014.89, down 225.05 points (2.00%).
Investors are concerned that the Fed’s tightening may last longer than expected.
Concern that the Fed’s higher interest rates might last longer than expected has grown as US economic data showed solid results following the November jobs report released later last week.
This week, on those concerns, the Dow fell 2.4%, while the S&P 500 and Nasdaq fell 3.2% and 3.9%, respectively. The S&P 500 Index fell for the fourth day in a row.
U.S. interest rate futures markets expect the Fed to raise its benchmark interest rate by 0.50 percentage point at its upcoming December meeting. However, with recent economic indicators showing a solid picture, tightening is expected to continue for some time.
There were also expectations that if the Fed slowed down its rate hike, it might stop raising interest rates sooner or later.
At the end of last month, John Williams, president of the Federal Reserve Bank of New York (Yeoneun), predicted that the U.S. interest rate would be cut in 2024. Goldman Sachs also predicted that there would be no interest rate cut next year, saying that the Fed is expected to raise interest rates by May next year.
The 10-year US Treasury yield fell by 5bp to 3.52%, while the 2-year Treasury yield fell by 2bp to 4.36%.
The 10-year and 2-year yield spread moved at -83bp. The spread between the two has been widening in December from -40bp in mid-October. As long-term interest rates fall below short-term interest rates, the interest rate inversion deepens, raising fears of a recession.
On this day, major bank executives warned of an economic downturn, worsening investor sentiment.
Jamie Dimon, CEO of JPMorgan Chase, the largest US bank, warned in an interview with CNBC that day that “inflation is eating away at everything” and that the US might face a moderate or strong recession next year.
David Solomon, CEO of Goldman Sachs, also said in an interview that the US might face a recession next year, saying “we have to assume we’re going to get into some rough times going forward.”
In a report issued the previous day, Bank of America warned that as recession fears grow, the S&P 500 might fall as low as 3,240, roughly 20% from current levels. It was judged that the index might be pushed to that level by April next year, saying that stock prices usually bottom out during a recession, not before a recession.
The US trade data released on the day was sluggish.
The U.S. trade deficit in October was $78.2 billion, up 5.4% from the previous month. It is interpreted that the decrease in exports to the highest level in four months had an effect on the expansion of the deficit.
Of the 11 sectors in the S&P 500 index, all 10 except utilities fell. Energy prices fell more than 2.6% as New York oil prices hit their lowest level since December last year amid fears of a recession.
Technology stocks and telecom stocks also fell more than 2%.
Among individual stocks, shares of Facebook parent company Meta fell more than 6% on news that the company’s targeted model was facing an investigation by European authorities. Mehta also warned that Facebook would take news off of it if the media bill, which is being discussed in the US Congress, is passed.
Shares of software developer GitLab jumped more than 9% on news that quarterly earnings beat expectations.
GameStop’s share price fell more than 8% amid reports from Axios that layoffs for some employees had begun.
Shares of JP Morgan Chase rose 0.17% on the news that Morgan Stanley raised its investment opinion by two steps from ‘underweight’ to ‘overweight’.
Shares of Morgan Stanley fell more than 2% amid news that the company had decided to cut 2% of its workforce. Bank of America’s stock fell more than 4% on news that it had decided to slow down hiring.
Experts on the New York stock market said that the market belatedly reflected the growing possibility that the Fed’s tightening would be prolonged as economic indicators showed strong signs.
John Porter, chief investment officer at Newton Investment Management, told MarketWatch that Friday’s unjustified optimism regarding the employment data came as a result.
“I was surprised by the market’s behavior on Friday, but I wasn’t surprised by yesterday’s move,” he said. “Many investors were interested in when the Fed would change direction, i.e., not just step out a little bit, but completely step out.”
“The stronger the employment data we get, the greater the risk that rates will rise longer than the market would like and the Fed may not be able to step out of its tighter grip,” Porter feared.
50 Park Investments CEO Adam Sahan told CNBC: “Basically, another round of job cuts are being made this week, which raises the possibility that the economy will make a hard landing next year and enter a deeper recession than originally expected.”
The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) recorded 22.17, up 1.42 points (6.84%) from the battlefield.
ysyoon@yna.co.kr
(End)
<저작권자(c) 연합뉴스, 무단 전재-재배포 금지>
