Tesla Down 4%... Expansion of Reflation Trading and Tech Stock Sell-Off Spreads (Comprehensive)

Flight to Cyclical Stocks in Gyeonggi
Dollar Strength Spreads Despite Stable Government Bond Yields

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The New York stock market closed lower across the board, unable to shake off the burden of weakness in tech stocks. The Nasdaq index plunged by 2%.

On the 24th (local time), the Dow Jones Industrial Average fell 3.09 points (0.01%) to close at 32,420.06, the S&P 500 index dropped 21.38 points (0.55%) to 3,889.14, and the Nasdaq index plunged 265.81 points (2.01%) to close at 12,961.89.

The news of a ship grounding accident in the Suez Canal pushed oil prices up by 6%, causing petrochemical and energy sectors' stock prices to rise by 2.5%, but the sharp decline in tech stocks held the market back.

There appears to be an expansion of 'reflation' trading, switching from tech stocks to economically sensitive stocks. Most travel, consumer, infrastructure, and financial-related stocks included in the Dow index rose on the day.

Tesla fell 4.8%, and Apple also dropped 2%. The ARK Innovation ETF, which invests in innovative stocks like Tesla, plunged 5.6%.

Chinese electric vehicle maker Nio plunged 10%. Coupang also fell 4.8%, approaching its lowest level since listing.

Intel, which announced a $20 trillion investment plan a day earlier, fell 2.5%, but ASML, a leading equipment supplier to Intel, saw its stock rise 3%.

Federal Reserve Chairman Jerome Powell said in testimony to the Senate that he does not expect inflation to overheat for an extended period and reiterated that the rise in Treasury yields reflects economic improvement. He added that the rise in interest rates was not something to worry about as it was expected.

The 10-year U.S. Treasury yield fell to the 1.61% range after Powell's testimony. It appears to be stabilizing after reaching 1.7% last week. The 5-year Treasury auction held that day also concluded without any significant changes.

Despite the decline in Treasury yields, the U.S. dollar showed strength. The dollar index, which measures the value of the dollar against major currencies, rose to 92.6 on the day. This is the highest level in four months. This situation contradicts expectations that the dollar's value would decline due to large-scale stimulus policies.

The rapid rollout of vaccines in the U.S. and the expanding economic recovery are credited with boosting the dollar's value. The worsening COVID-19 situation in Europe and the weakening euro are also driving dollar strength.

Some analysts also attribute the rise in the dollar's status as a safe-haven asset to U.S. tax increase policies and escalating conflicts between the West and China.

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