[New York Stock Market] Fed Tightening Rebound on Buyback Demand After 3 Trading Days... Dow Up 0.25%

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Major U.S. stock indices in New York rebounded on the 7th (local time) after falling for two consecutive days, marking a recovery after three trading sessions. The market closed higher as buying continued amid concerns that the Federal Reserve's aggressive tightening could lead to larger declines.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,583.57, up 87.06 points (0.25%) from the previous session. The S&P 500 index rose 19.06 points (0.43%) to 4,500.21, and the tech-heavy Nasdaq index ended trading at 13,897.30, up 8.48 points (0.06%) from the previous session.

Edward Moya, an analyst at OANDA, said, "There seems to be some impact from the release of the Federal Open Market Committee (FOMC) minutes announced the day before," adding that investors are closely watching where the economy is headed and how the Fed's monetary policy will affect it.

The Fed is expected to begin quantitative tightening (QT) by reducing its balance sheet as early as next month. Interest rates are also expected to be raised by 50 basis points or more at least once, signaling a rapid tightening. The balance sheet reduction is likely to proceed faster than before, with a monthly cap of $95 billion (approximately 116 trillion KRW). As interest rates rise, the burden on households and businesses is expected to increase compared to before.

James Bullard, President of the Federal Reserve Bank of St. Louis, stated in a lecture that the Fed is falling behind in the fight against inflation and argued that the benchmark interest rate should be raised to around 3.5% this year. He said, "I believe we need to honestly raise the policy rate to respond to the inflation looming ahead." Last month, he also expressed a minority opinion at the FOMC, advocating for a 50 basis point rate hike.

The yield on the U.S. 10-year Treasury note has recently shown a sharp rise amid tightening concerns, climbing from 2.61% to around 2.66% on the day. The 10-year Treasury yield remains at its highest level in three years.

Among the S&P 500 sectors, healthcare, energy, and consumer staples stocks rose, while real estate, telecommunications, and utilities stocks declined. Berkshire Hathaway, led by Warren Buffett, disclosed that it purchased shares of Hewlett-Packard (HP), causing HP's stock price to surge more than 14%. Costco, Pfizer, Walmart, and Merck also saw stock price gains. Conversely, Tesla and Twitter fell by 1.1% and 5.4%, respectively.

New York market experts expect volatility to continue for the time being. Charlie Ripley, Senior Investment Strategist at Allianz Investment Management, told CNBC, "The minutes showed that market participants have shifted toward expecting the Fed to reduce its balance sheet faster than anticipated, increasing the sense of urgency compared to before."

Meanwhile, news of the International Energy Agency (IEA) releasing strategic oil reserves led to the May West Texas Intermediate (WTI) crude oil price on the New York Mercantile Exchange falling 20 cents (0.2%) to close at $96.03 per barrel. This is the lowest level since April 16. Brent crude also dropped intraday to $98.45, falling below $100 per barrel for the first time since April 17.

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