[New York Stock Market] Powell's 'Hawkish' Remarks Trigger Decline... US 10-Year Treasury Yield Surges to 2.3% Range

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York Stock Exchange fell on the 21st (local time) following remarks by Federal Reserve (Fed) Chair Jerome Powell, who hinted at a so-called 'big step' (0.50 percentage point rate hike) to curb soaring inflation. The yield on the U.S. 10-year Treasury note surged to the 2.3% range.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,552.99, down 201.94 points (0.58%) from the previous session. The tech-heavy Nasdaq Composite fell 55.38 points (0.40%) to close at 13,838.46. The large-cap S&P 500 index dropped 1.94 points (0.04%), remaining near flat. The small-cap Russell 2000 index recorded 2,065.94, down 20.21 points (0.97%).

By individual stocks, Occidental Petroleum and Marathon Oil saw their shares rise 8.39% and 8.54%, respectively, due to the impact of rising oil prices.

Boeing's stock fell 3.59% following reports that a China Eastern Airlines passenger plane, carrying 132 people, crashed in southern China. The shares of China Eastern Airlines, listed in New York, dropped more than 6%. Meanwhile, Berkshire Hathaway's shares rose over 2%, and Alleghany's shares surged more than 24% after news that Berkshire Hathaway agreed to acquire the U.S. insurer Alleghany for $11.6 billion.

Some tech stocks also weakened as U.S. Treasury yields soared amid inflation concerns. Meta Platforms, Facebook's parent company, fell 2.31%, and Microsoft declined 0.42%. However, Tesla closed up 1.74%, and Nvidia rose 1.06%.

Investors focused on the ongoing war situation between Russia and Ukraine, the resulting oil price movements, and Chair Powell's speech. Powell attended the National Association for Business Economics (NABE) conference and made his first public remarks since the Federal Open Market Committee (FOMC) meeting on the 16th, where a 0.25 percentage point rate hike was decided for the first time in 3 years and 3 months.

At the event, Powell stated, "The labor market is very strong, but inflation is too high," reaffirming that more aggressive tightening could be pursued if necessary. He indicated the possibility of a so-called ‘big step’ of a 0.5 percentage point hike, saying, "If we decide that more tightening is needed beyond the usual measures, we will do so."

Following Powell's hawkish remarks, the stock market declined, and the yield on the U.S. 10-year Treasury note rose to the 2.3% range. The 30-year yield stood in the 2.5% range. The 2-year yield, sensitive to monetary policy, also surpassed 2%, reaching its highest level since 2019. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds (FF) futures market on the day priced in over a 50% chance of a 0.5 percentage point hike at the May FOMC meeting.

Geopolitical risks surrounding Ukraine continue. Russia is conducting peace negotiations with Ukraine while continuing military operations, including surrounding the southern strategic city of Mariupol and issuing an ultimatum demanding surrender.

International oil prices rose on news that, following the U.S., European Union (EU) countries are also considering banning imports of Russian crude oil. On the New York Mercantile Exchange, April West Texas Intermediate (WTI) crude oil closed at $112.12 per barrel, up $7.42 (7.1%) from the previous session.

Major foreign media cited senior EU diplomats saying that the EU's planned fifth round of sanctions against Russia may include a ban on Russian oil imports. At the EU foreign ministers' meeting held that day, Lithuania and Ireland supported the Russian energy sanctions, while Germany and the Netherlands expressed opposition. There is a possibility that such discussions will be revisited during U.S. President Joe Biden's visit to Europe this week. Additionally, news that Saudi Arabian oil facilities were attacked by Yemeni rebels also added upward pressure on oil prices.

Investors are also monitoring reports that the Omicron subvariant 'BA.2' cases are rapidly increasing in the U.S., following Europe.

Michael Wilson, an analyst at Morgan Stanley, stated in an investor note released that day, "Last week's market rally was one of the steepest in history," but added, "We are still in a bear market." Chris Senek, a researcher at Wolfe Research, commented, "The geopolitical situation is extremely fluid, inflation will continue to rise, and growth prospects are weakening," adding, "I still do not believe we are at a sustainable bottom."

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