NY Stock Market 'Panic' Amid Sharp Rise in US Treasury Yields... Tech and Semiconductor Stocks Plunge

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Inflation rise and the possibility of economic growth slowdown have come to the forefront, coupled with U.S. monetary policy normalization, U.S. government shutdown, and default concerns, spreading turmoil in the international financial markets.

U.S. Treasury yields rose to their highest levels since June, causing tech stocks to plummet simultaneously at a 'seizure' level, and major New York stock indices, led by the Nasdaq, also fell sharply.

On the 28th (local time), the Dow Jones Industrial Average fell 1.6%, the S&P 500 dropped 2.04%, and the Nasdaq plunged 2.83%.

The S&P 500 showed its largest decline since May, and the Nasdaq its biggest drop since March. As market volatility increased, the VIX, known as the fear index, surged vertically by 23% that day.

Following the previous day's rise in U.S. Treasury yields above 1.5%, the continued upward trend in bond yields dealt a direct blow to tech stocks.

On that day, the U.S. 10-year Treasury yield rose intraday to 1.567%. Although U.S. Treasury yields had fallen to 1.13% in August, they climbed to the highest level since June after the Fed made asset purchase tapering within the year a fait accompli.

It is also analyzed that the previous day's lack of demand in U.S. Treasury auctions further fueled the rise in bond yields. Rising bond yields mean falling bond prices.

James Bullard, President of the St. Louis Fed, advocating two rate hikes next year, was also seen as negatively impacting investor sentiment.

Leading stocks such as Apple fell 2.3%, Microsoft plunged 3.6%, Facebook and Alphabet dropped 3%, Amazon declined 2.6%, and Tesla closed down 1.7%.

Semiconductor-related companies' stocks also plunged sharply. Lithography equipment makers ASML and Applied Materials each showed a large drop of about 6%.

A major foreign news outlet commented that concerns over rate hikes, supply chain disruptions, rising inflation, and economic growth slowdown were simultaneously reflected, and the Fed's attempt to normalize monetary policy is shaking the market.

Sammy Ka, Chief Economist at Swiss Bank Lombard Odier, reported that concerns about stagflation, where high inflation and economic growth slowdown coincide, are widespread in the market.

The Conference Board's consumer confidence index released that day was seen as a signal of economic slowdown. This month's consumer confidence index was 109.3, a sharp decline from 115.2 the previous month. It also stood out compared to experts' forecast of 115.0.

Investment bank Jefferies analyzed, "Consumers seem to be fearful of the spread of the Delta variant."

The sharp rise in prices of raw materials such as crude oil is also fueling expectations that inflationary pressures will increase.

However, energy-related stocks showed strength due to the strong oil prices, rising alone even in the weak market.

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