[New York Stock Market] Plunge After One Day of Relief Rally... Nasdaq Down 4.99%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York stock market all plunged on the 5th (local time). Just less than a day after Federal Reserve (Fed) Chair Jerome Powell ruled out a giant step of raising interest rates by 0.75 percentage points at once, triggering a relief rally, the gains were completely wiped out, marking the 'worst day' so far this year. The Dow Jones Industrial Average and the Nasdaq Composite experienced their largest declines since 2020.

On that day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 32,997.97, down 1,063.09 points (3.12%) from the previous session. The S&P 500, which focuses on large-cap stocks, fell 153.30 points (3.56%) to 4,146.87, and the tech-heavy Nasdaq Composite dropped 647.16 points (4.99%) to 12,317.69. The small-cap Russell 2000 index also closed lower at 1,871.15, down 78.78 points (4.04%).

Economic media CNBC reported, "The declines in the Dow and Nasdaq were the largest since 2020," adding that the S&P 500's daily drop was the second largest this year.

By individual stocks, a sharp plunge was confirmed among large technology stocks sensitive to interest rates. Meta Platforms, the parent company of Facebook, closed down 6.77% from the previous session. Representative tech stocks such as Amazon (-7.56%), Microsoft (-4.36%), Tesla (-8.33%), and Apple (-5.57%) also fell in unison. Nvidia dropped 7.33%, AMD fell 5.58%, and Salesforce slid more than 7%.

Etsy and eBay closed down 16.83% and 11.72%, respectively, after releasing sales guidance below market expectations. Shopify also ended the day nearly 15% lower. CNBC reported that over 80% of S&P 500 constituent stocks showed declines amid widespread selling pressure that day.

After the Fed's FOMC regular meeting, the market had shown a relief rally but reversed sharply within a day, erasing all gains from the previous day by the morning session. Randy Frederick, director at Schwab Center for Financial Research, said, "If the market rises more than 3% and then gives up 0.5% the next day, that is quite normal. But to see a day like yesterday and then a 100% reversal within half a day is truly astonishing."

Shima Shah, chief strategist at Principal Global Investors, commented, "Yesterday's market was a relief rally," adding, "By Thursday, the reality of a more challenging environment for the stock market, including high interest rates, earnings, and a strong dollar pressuring multinational companies' overseas sales, became apparent."

In the bond market, U.S. Treasury yields surged. The 10-year yield surpassed 3%, reaching its highest level since 2018.

Earlier, the Fed announced, as expected by the market, a 0.5 percentage point rate hike and the start of balance sheet reduction from June. At the subsequent press conference, Chair Powell drew a line by saying he was not actively considering a 0.75 percentage point hike, easing concerns about 'aggressive tightening.' However, he hinted at additional 0.5 percentage point hikes in the next two meetings, indicating that market burdens remain significant.

David Rubenstein, co-founder of The Carlyle Group, appeared on CNBC's Squawk Box and said, "Investors need to realize the headwinds that rate hikes bring to the market and economy and come back to reality," diagnosing, "If rates are raised by 0.5 percentage points in the next two meetings, the financial environment will become somewhat tighter."

Zachary Hill, head of portfolio strategy at Horizon Investments, said, "The financial environment has entered a tightening phase over the past few months, but it is clear that the Fed will tighten further," and evaluated, "The possibility remains open that the Fed will apply rates above neutral to curb inflation."

On that day, U.S. economic indicators were mixed. The number of weekly jobless claims for the week ending May 30 fell by 19,000 from the previous week to 200,000. U.S. nonfarm labor productivity in the first quarter declined at an annual rate of 7.5% compared to the previous quarter, marking the largest drop since the third quarter of 1947 and falling short of market expectations.

Oil prices rose on news that oil-producing countries maintained their crude oil production increase at the existing level. On the New York Mercantile Exchange, June West Texas Intermediate (WTI) crude oil closed at $108.26 per barrel, up 45 cents (0.4%) from the previous session.

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