'Maepa' Signals March Rate Hike... Nasdaq Fails to Attempt Rebound

James Bullard, President of the St. Louis Federal Reserve Bank
[Photo by Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The New York stock market showed weakness for two consecutive days due to the Federal Reserve's (Fed) indication of a March interest rate hike and early quantitative tightening. The Nasdaq index, which had plunged 3.3% the previous day, attempted an intraday rebound but failed to overcome the downward trend as James Bullard, President of the St. Louis Fed, strongly advocated for a March rate hike.

On the 6th (local time), the Dow Jones Industrial Average fell 0.47%, the S&P 500 dropped 0.1%, and the Nasdaq declined 0.13% at the close.

The Nasdaq tried to turn positive during the session but had to settle for a slight decline as selling pressure spread again toward the end of trading. After rising on the first trading day of the new year, the Nasdaq fell for three consecutive days.

President Bullard firmly predicted that "interest rates will be raised in early March." This statement reaffirmed the surge in the possibility of a March hike following the release of the December Federal Open Market Committee (FOMC) minutes the previous day, which suggested an accelerated timing for rate increases.

Bullard said, "The Fed may raise rates starting in March to gain an upper hand in controlling inflation." However, he also anticipated that rate hikes since 2022 could be either accelerated or delayed depending on the inflation situation.

Bullard is classified as the most hawkish member among the FOMC participants this year.

The weekly initial jobless claims released that day came in at 207,000, exceeding expectations, but the employment market is analyzed to be strong despite the spread of the Omicron variant.

Amid strong employment, Bullard explained that the Fed has sharply shifted its monetary policy direction toward tackling inflation to manage the situation where inflation significantly exceeds the Fed's target.

On the same day, the Chicago Mercantile Exchange FedWatch tool projected a 72.8% chance of a March rate hike. This is a sharp increase from the 46.5% probability a week earlier.

The 10-year U.S. Treasury yield continued its rise, reaching 1.73%. The 2-year yield, sensitive to rate policy, hit a two-year high at 0.873%. Despite the rise in bond yields, the U.S. dollar's strength was limited. The dollar index rose by only 0.09% that day.

Bank stocks continued their upward trend amid rising interest rates. Banks such as JP Morgan and Bank of America rose 1-2%.

The fortunes of tech stocks diverged. Meta rose 2.5% due to bargain buying, but core tech stocks like Google, Microsoft, and Apple declined. Tesla also fell 2.1%.

Liz Young, investment strategist at SoFi, said, "The first rate hike that everyone fears was not so harmful to the stock market," adding, "A rate hike is not a death sentence for the market and tech stocks."

With international oil prices rising more than 2%, energy-related stocks such as Occidental Petroleum and Chevron were strong.

Pharmacy chain Walgreens fell 2.8% despite strong earnings, but meme stock Bed Bath & Beyond surged 7.9% despite reporting third-quarter losses.

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