[New York Stock Market] Slight Gains Amid Uncertainty Over Short- and Long-Term Interest Rate Inversion... Dow Up 0.40%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices of the U.S. New York stock market closed slightly higher on the 1st (local time) amid mixed positive and negative factors. Concerns about a recession resurfaced due to the inversion of 2-year and 10-year Treasury yields, while oil prices fell below $100 per barrel.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,818.27, up 139.92 points (0.40%) from the previous session. The S&P 500, focused on large-cap stocks, rose 15.45 points (0.34%) to 4,545.86, and the tech-heavy Nasdaq index closed up 40.98 points (0.29%) at 14,261.50.

Investors closely watched the employment report, Treasury yield movements, and oil price trends following announcements of strategic oil reserve releases by major countries.

By individual stocks, bank shares showed weakness, with Citigroup down 2.04%. Intel fell 2.93% and AMD dropped 1.05% amid concerns over demand in the PC market. Dell Technologies’ shares declined 2.77% after Goldman Sachs lowered its price target. McLaren rose 2.45%, and Walmart increased by 1.40%. Chinese companies listed on the New York Stock Exchange surged on reports that they are considering sharing audits with foreign regulators.

In the bond market, the U.S. 10-year Treasury yield remained below the 2-year yield throughout the day. The inversion widened to the largest extent since early 2007, showing a different pattern from the inversion seen at the end of last month when short- and long-term yields briefly flipped. Around 4 p.m., the 2-year yield stood at 2.456%, surpassing the 10-year yield of 2.373%.

The surge in short-term yields was attributed to the employment report released before the market opened. According to the U.S. Department of Labor, nonfarm payrolls increased by 431,000 in March, falling short of the market forecast of 490,000. However, the unemployment rate dropped from 3.8% in the previous month to 3.6%, approaching the half-century low of 3.5% recorded before the pandemic.

With recent monthly job gains around 500,000 and a continuing decline in the unemployment rate, there are expectations that the Federal Reserve’s tightening measures could accelerate, pushing both short- and long-term yields higher. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds (FF) futures market now prices in over a 75% chance of a 0.5 percentage point rate hike by the Fed in May, up from before the employment report release.

Jason Fryd, Chief Investment Officer (CIO) of Glenmede’s Private Wealth division, said, "Inflation is the Fed’s biggest concern," adding, "The Fed is likely to continue its tightening path."

However, concerns about recession signals are rising as the inversion of short- and long-term Treasury yields persists. The inversion of U.S. Treasury yields is generally regarded as a litmus test predicting economic recessions.

Meanwhile, investors are also paying attention to geopolitical risks between Russia and Ukraine. Russia confirmed slight progress in peace negotiations with Ukraine on the day.

Oil prices fell below $100 per barrel following news that International Energy Agency (IEA) member countries, along with the U.S., agreed to release strategic reserves. On the day, May West Texas Intermediate (WTI) crude oil prices on the New York Mercantile Exchange closed at $99.27 per barrel, down $1.01 (1%) from the previous session. This is the first close below $100 per barrel since March 16. WTI prices fell about 13% over the week, marking the largest weekly decline since April 2020.

U.S. President Joe Biden announced in a White House speech, "This morning, more than 30 countries around the world convened an emergency meeting and agreed to release tens of millions of additional barrels into the market."

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