A Sleepless Night for Foreign Investors... 'Interest Rates' More Than Powell

US 10-Year Treasury Yield Surges to 1.75%
New York Stock Market Volatility Index Soars to 12.28%
Nasdaq Down 3.02%, S&P 500 Down 1.48%, Dow Down 0.46%

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Junho Hwang] The U.S. 10-year Treasury yield surged to 1.75% on the 18th (local time), causing the Nasdaq to drop more than 3%. Although Federal Reserve Chairman Jerome Powell emphasized a dovish monetary policy after the Federal Open Market Committee (FOMC) meeting the previous day, the lack of a clear solution to inflation led to rising yields, which exerted downward pressure on the stock market. As a result, stocks primarily invested in by Seohak Gaemi, such as Tesla, Apple, Facebook, and Amazon, fell one after another.

Market Yields Become the Fear Index

On the 18th, the U.S. stock market appeared to interpret the rising market yields as a fear index. The U.S. 10-year Treasury yield closed at 1.71% that day. The U.S. economic media outlet The Wall Street Journal analyzed this as the highest level since January last year, before the outbreak of COVID-19.

Sonali Desai, Chief Investment Officer of Franklin Templeton Fixed Income Group, told the U.S. economic channel CNBC, "The Fed has indicated that it can tolerate inflation, and the bond market seems to be accepting the possibility of rising inflation."

The stock market perceived the rise in yields as fear, which led to increased volatility. The New York Stock Exchange Volatility Index soared by 12.22%. The Nasdaq, focused on technology stocks, fell 3.02% (409.03 points) to 13,116.17 compared to the previous trading day. The S&P 500 index also closed down 1.48% (58.66 points) at 3,915.46. The Dow Jones Industrial Average closed at 32,862.30, down 0.46% (153.07 points).

Sleepless Night for Seohak Gaemi

On this day, Tesla, considered a representative investment stock among Seohak Gaemi, dropped by as much as 6.93%, closing at $653.16 per share. While the yield impact was a factor, the decline widened following news that the U.S. National Highway Traffic Safety Administration (NHTSA) launched an investigation into Tesla vehicle crash incidents. NHTSA is investigating 23 out of 27 cases and stated that at least three accidents have occurred in recent weeks.

Apple closed at $120.53, down 3.39%, and Amazon ended the day at $3,027.99, down 3.44%. Alphabet (Google's parent company) fell 2.92% to $2,021.34, and Facebook closed at $278.60, down 1.90%. Nvidia also recorded a 4.64% decline, closing at $508.90.

According to the securities portal SaveRo, the stocks with the largest holdings as of that day were Tesla, Apple, Amazon, Nvidia, and Alphabet.

Kiwoom Securities researcher Sangyoung Seo explained, "The U.S. stock market fell due to the rapid rise in U.S. Treasury yields amid expectations that the timing of interest rate hikes in various countries will be brought forward," adding, "Selling pressure was mainly seen in technology and theme stocks." He also added, "The more than 7% plunge in international oil prices due to the strong dollar, strengthened economic lockdowns in France, and U.S.-Russia tensions also added to the burden."

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