[New York Stock Market] Volatile Trading Amid Rising Tightening Concerns... Sharp Surge in Treasury Yields

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Hyunjung] As the outlook that the U.S. Federal Reserve (Fed) will take aggressive interest rate hikes to combat inflation becomes dominant, the New York stock market continued its volatile trend amid concerns of an economic recession.

On the 14th (local time), the U.S. New York stock market closed mixed. The Dow Jones Industrial Average fell 151.91 points (0.5%) to 30,364.83, while the Standard & Poor's (S&P) 500 dropped 14.15 points (0.38%) to 3,735.48. The S&P 500 closed lower for the fourth consecutive trading day, down 21.82% since the beginning of the year. The Nasdaq Composite rose 19.12 points (0.18%) to close at 10,828.35.

With the Fed's rate hike decision just a day away, the market showed a cautious response. At the Federal Open Market Committee (FOMC) meeting on the 15th, the Fed is widely expected to implement a 'giant step' by raising interest rates by 0.75 percentage points at once. Consequently, the yield on the U.S. 2-year Treasury surged to 4.70%, reaching levels last seen in 2007.

Shima Shah, Chief Global Strategist at Principal Global Investors, said, "Today's volatility is evidence of uncertainty about the FOMC meeting and concerns about the impact of aggressive tightening policies on the economy," adding, "Because the possibility of a 0.75 percentage point hike is a very significant risk, market participants need to quickly reassess economic and market outlooks."

According to Bank of America's (BoA) monthly fund survey, investors' fears of stagflation?rising prices amid economic recession?are at their highest since the 2008 financial crisis, while global growth optimism is at an all-time low. Global earnings expectations are also at 2008 levels. BoA strategists pointed out that earnings expectations have deteriorated to levels seen during Wall Street crises such as the Lehman Brothers bankruptcy and the dot-com bubble burst.

Bloomberg reported that, based on precedent, the recent weakness in the U.S. stock market is expected to have a long recovery period. Between 2000 and 2002, the market fell 51% from its peak, and during the 2008 financial crisis, it dropped 58%, with both taking over 1,000 trading days to recover.

Meanwhile, the Bloomberg Dollar Spot Index rose 0.4%, the Japanese yen fell 0.6% to 135.20 yen per dollar, and the British pound dropped 1.2% to 1.1987 dollars per pound. The 10-year Treasury yield increased by 0.11 percentage points to 3.47%.

On the New York Mercantile Exchange (NYMEX), West Texas Intermediate (WTI) crude oil for July delivery fell 2.1% to $118.34 per barrel, while gold for August delivery on the New York Commodity Exchange declined 1.3% to $1,808.60 per ounce compared to the previous day.

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