[New York Close] The Stock and Bond Reversal Drama Created by Fear

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The US New York stock market showed a decline of over 3% for two consecutive days. Concerns spread that the US is not a safe zone from the novel coronavirus infection (COVID-19), rendering attempts at a rebound ineffective. Meanwhile, US Treasury prices hit record highs, maximizing the preference for safe assets.

On the 25th (local time) at the New York stock market, the Dow Jones Industrial Average fell 879.44 points (3.15%) from the previous day to close at 27,081.36, the S&P 500 index dropped 97.68 points (3.03%) to 3,128.21, and the Nasdaq index declined 255.61 points (2.77%) to 8,965.61.

On that day, major indices initially showed an upward trend as attempts were made to recover from the previous day's plunge, but when the US Centers for Disease Control and Prevention (CDC) issued a warning that COVID-19 infections would spread in the US, investor sentiment worsened and the market sharply reversed into a decline.

Contrary to the stock market decline, US Treasuries continued their strong rally. The 10-year US Treasury yield fell to a historic low of 1.31%. The 10-year yield surpassed the previous record low of 1.325% at once, aiming to enter the 1.2% range. The 10-year yield has steadily declined from the 1.6% range in early January, with the recent drop accelerating. The 30-year yield also recorded a historic low at 1.798%. A decline in Treasury yields means a rise in bond prices.

The drop in US Treasury yields is also raising expectations within the market for the Federal Reserve's (Fed) possibility of cutting interest rates. The Chicago Mercantile Exchange's FedWatch tool estimates a 40% chance that the Fed will cut the benchmark interest rate three times this year.

Larry Kudlow, Chairman of the US White House National Economic Council (NEC), sought to calm market concerns about COVID-19. In an interview with CNBC, he said, "The US has been suppressing COVID-19 and is quite close to containment." He added, "The US economy is holding up well, and the Fed will not cut interest rates in response to the spread of COVID-19."

On the same day at the New York Mercantile Exchange (NYMEX), April delivery West Texas Intermediate (WTI) crude oil closed down 3.0% ($1.53) at $49.90 per barrel, breaking below the $50 level.

International gold prices, which had been strong as a safe asset, reversed and declined. At the New York Commodity Exchange, April gold closed down 1.6% ($26.60) at $1,650.00 per ounce compared to the previous day.

This content was produced with the assistance of AI translation services.