New York Stock Market Plummets Amid Soaring Inflation... Cryptocurrency Also Weak (Comprehensive)

Coupang IPO Price Collapse

[Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Concerns over a sharp rise in inflation have driven investors in the New York stock market into 'panic.' Although Federal Reserve (Fed) officials reiterated that there is no plan for early interest rate normalization or asset purchase tapering, major indices on the New York Stock Exchange all plunged sharply.

On the 12th (local time), the Dow Jones Industrial Average fell 681.50 points (1.99%) to close at 33,587.66, the S&P 500 index dropped 89.06 points (2.14%) to 4,063.04, and the Nasdaq index declined 357.75 points (2.67%) to 13,031.68.

Due to concerns over rising interest rates caused by inflation increases, the Nasdaq index fell more than 5% over three trading days. The Dow's decline was the largest since January, and the S&P 500 recorded its biggest drop since February.

The news that the Consumer Price Index (CPI) for April rose 4.2% year-on-year sent investor sentiment into a 'free fall.' Although the Dow Jones consensus estimate was 3.6%, which already raised concerns, the actual figure significantly exceeded expectations.

Immediately after the CPI announcement, the yield on the U.S. 10-year Treasury note surged. The 10-year Treasury yield jumped to 1.693% that day. A rise in Treasury yields means a drop in bond prices. Inflation-protected Treasury yields also soared, with the 5-year breakeven inflation rate rising to 2.767%. This reflects the market's assessment that inflation could reach 2.76% over the next five years. This is the highest level since 2011. The rise in Treasury yields also strengthened the value of the U.S. dollar.

Federal Reserve Vice Chair Richard Clarida, in a speech to the National Association for Business Economics (NABE), said that inflation is expected to rise further over the next few months but emphasized that it is a temporary phenomenon.

Vice Chair Clarida stated, "The price increase is a base effect and is likely to have only a temporary impact," adding, "Inflation is expected to return to our 2% long-term target or slightly above in 2022 and 2023," but he failed to calm market jitters.

White House Press Secretary Jen Psaki also continued to argue that the inflation rise is temporary, saying, "We have anticipated inflation increases over several months."

Some suggest that since the Fed has repeatedly failed to achieve its 2% inflation target since the 2008 financial crisis, the economic recovery following the COVID-19 pandemic could serve as an opportunity for a 'benign inflation' recovery. For example, the European Central Bank is still struggling to defend against deflation.

By sector, most stocks were weak regardless of whether they were tech or cyclical stocks. Only two stocks in the Dow index rose. Apple fell 2.4%, Microsoft dropped 2.9%, and Tesla declined 4.4%, falling back into the $500 range.

Coupang, which announced its first earnings since listing, fell 2.5% in regular trading and an additional 2% in after-hours trading, trading around $34. Coupang's stock price fell below its IPO price of $35 for the first time that day.

Cryptocurrency Bitcoin fell 4% to the $54,000 range, Ethereum dropped 0.8% to around $40,000, and Dogecoin declined 7.5% to 46 cents.

The rapidly rising Internet Computer fell 21%, trading around $290.

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