[New York Stock Market] Mixed Trends Amid Concerns Over Accelerated Tightening... US Treasury Yields Surge

[Image source=Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York stock market showed mixed trends on the 25th (local time) amid geopolitical risks surrounding Ukraine and concerns over the Federal Reserve's (Fed) accelerated tightening. With expectations that the tightening pace could accelerate further, the U.S. 10-year Treasury yield briefly surpassed the 2.5% level during the session.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,861.24, up 153.30 points (0.44%) from the previous session. The S&P 500, centered on large-cap stocks, rose 22.90 points (0.51%) to 4,543.06. Meanwhile, the tech-heavy Nasdaq index closed down 22.54 points (0.16%) at 14,169.30.

By sector, financial stocks showed strength amid forecasts that the Fed, which has taken a tough stance to curb inflation, may widen the scope of future rate hikes. Bank of America (BoA) and Wells Fargo rose 1.53% and 2.40%, respectively, from the previous close. Conversely, technology stocks weakened. Fortinet fell 2.98%. Nvidia (-1.63%), Micron (-0.14%), and Tesla (-0.32%) also ended the day lower.

Bed Bath & Beyond's shares rose 2.22% after announcing cooperation with activist investor Ryan Cohen and RC Ventures. Alibaba, listed in New York, dropped 1.88% after the Public Company Accounting Oversight Board (PCAOB), the U.S. accounting regulatory body, said it was premature to say it had reached an agreement with China. JD.com’s stock also fell 2.60%.

Investors continued to monitor the latest news on the Ukraine situation while focusing on the Fed’s monetary tightening moves and the resulting Treasury yield movements. Since Fed Chair Jerome Powell left open the possibility of a so-called 'big step' rate hike of 0.5 percentage points at once, expectations for aggressive Fed tightening have grown stronger.

On the day, Citigroup forecast that the Fed could take about four big steps this year. Citi stated, "The Fed could raise rates by 0.5 percentage points in May, June, July, and September, and by 0.25 percentage points in October and December," projecting the policy rate at the end of 2022 to be between 2.75% and 3.0%. BoA also supported the big step, expecting the Fed to raise rates by 0.5 percentage points in June and July this year. The policy rate level for May 2023 was forecast at 3.0% to 3.25%.

Following these forecasts, the 10-year Treasury yield surged to 2.503% during the session. The breach of the 2.5% level was the first since May 2019. The 2-year yield, sensitive to monetary policy, stood at 2.29%. The spread between the 10-year and 2-year yields hovered around 0.20 percentage points, raising concerns about yield curve inversion, which is often seen as a precursor to recession. The Wall Street Journal (WSJ) reported that short-term Treasury yields rose above long-term yields as a signal of Fed tightening.

The prolonged Russian invasion of Ukraine is also exacerbating inflation and supply chain disruption concerns. U.S. President Joe Biden, visiting Europe, stated the day before that Russia, which invaded Ukraine, should be expelled from the Group of Twenty (G20) and strongly warned that the U.S. would respond if Russia uses chemical weapons. On the day, President Biden visited Rzesz?w, Poland, located 80 km from the Ukrainian border, and plans to hold talks with Polish President Andrzej Duda on the 26th and visit a Ukrainian refugee reception center.

Fahad Kamal, Chief Investment Officer at Kleinwort Hambros, said, "The longer the conflict lasts, the higher the inflation rise and the deeper the growth decline will be," adding, "It is very uncertain." Mark H?fele, Chief Investment Officer at UBS Global Wealth Management, diagnosed, "Despite the Fed’s hawkish remarks and stagflation concerns, stock prices are rising because many believe there are no alternatives to equities."

International oil prices rose on news that Saudi Arabia’s oil facilities were attacked by Yemeni rebels. On the New York Mercantile Exchange, May West Texas Intermediate (WTI) crude oil closed at $113.90 per barrel, up $1.56 (1.39%) from the previous session. WTI prices rose 10.49% over the week.

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