[New York Stock Market] 'Hawkish' Powell Aftershock Continues... Nasdaq Closes Down 1.02%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] On the 29th (local time), major indices of the U.S. New York stock market closed down across the board, continuing to monitor the aftermath of Federal Reserve (Fed) Chair Jerome Powell's hawkish remarks made last week in Jacksonville. U.S. Treasury yields sensitive to monetary policy surged, with the 2-year Treasury yield briefly hitting its highest level since 2007 during the session.

At the New York Stock Exchange (NYSE) that day, the Dow Jones Industrial Average closed at 32,098.99, down 184.41 points (0.57%) from the previous session. The large-cap S&P 500 index fell 27.05 points (0.67%) to 4,030.61, and the tech-heavy Nasdaq index dropped 124.04 points (1.02%) to close at 12,017.67.

By individual stocks, technology shares sensitive to interest rate hikes slid across the board. Tesla closed down 1.14% from the previous session. Meta Platforms (-1.61%), Apple (-1.37%), Amazon (-0.96%), Alphabet (-0.83%), and Microsoft (-1.07%) also declined. Notably, leading semiconductor stocks such as Nvidia (-2.82%) and AMD (-2.95%) fell nearly 3%, leading the tech sector's downturn.

On the other hand, the energy sector showed a rally. ExxonMobil rose 2.30%. Chevron increased by 0.75%, and Occidental Petroleum climbed 2.32%. ConocoPhillips (+1.16%), Diamondback Energy (+3.98%), and Marathon Oil (+2.41%) also closed higher.

Additionally, Pinduoduo surged nearly 15% following its pre-market earnings announcement. Pharmaceutical company Catalent slid more than 7% as its annual earnings outlook fell short of expectations. The first rocket launch of the U.S. manned lunar exploration Artemis program was postponed due to engine defects, causing Maxar Technologies to fall 3.28% and Raytheon Technologies to drop 1.50%.

Investors digested Fed Chair Powell's speech from last week's Jackson Hole economic symposium, closely watching the future tightening path and Treasury yield movements. In his speech last week, Powell made hawkish remarks, stating that "a restrictive policy stance will need to be maintained for some time," which led to a sharp market sell-off with the Dow Jones dropping over 1,000 points. Although the Dow briefly turned positive during the session, it ultimately closed lower amid market concerns that Fed tightening would continue.

According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds (FF) rate futures market currently prices in more than a 74% chance that the Fed will raise rates by 0.75 percentage points at the September meeting, up from 55% last week and 61% the previous day. The probability of a 0.5 percentage point hike has dropped to the mid-20% range. Some experts have even started discussing the possibility of a 1.0 percentage point hike.

The aftermath of Powell's hawkish remarks also pushed U.S. Treasury yields higher. In the New York bond market, the 2-year Treasury yield, sensitive to monetary policy, reached 3.41%, marking the highest level in about 15 years since 2007. The 10-year yield also jumped to 3.11%.

Safe-haven demand was also confirmed in the foreign exchange market. The Dollar Index, which reflects the value of the U.S. dollar against six major currencies, briefly surged to 109.476, the highest level in 20 years since 2002. However, the dollar's value later weakened, falling to around 108.8 and closing steady.

The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's "fear gauge," surpassed the 27 level during the session, marking a seven-week high.

Market experts foresee a possible stock price correction soon, as Powell confirmed a strong tightening stance to curb inflation. Jonathan Krinsky of BTIG expressed concerns that the S&P 500 could be readjusted around the 3,900 level. He said, "There is some mechanical trading happening today," and added, "We need to watch the downside more closely when it falls to the 3,900 level."

Michael Wilson, Chief Equity Strategist at Morgan Stanley, stated, "The direction of U.S. stocks ultimately depends on earnings," and assessed that "considering earnings and other factors, there is downside risk for stock prices." Adam Crisafulli of Vital Knowledge noted, "Selling pressure is easing, but genuine buying demand is not strong," and mentioned, "Even bulls are hoping that key macro indicators such as this week's China PMI, Eurozone CPI, and U.S. employment report will pass smoothly."

Oil prices closed higher, watching for possible production cuts by the Organization of the Petroleum Exporting Countries (OPEC). On the New York Mercantile Exchange, October West Texas Intermediate (WTI) crude oil prices closed at $97.01 per barrel, up $3.95 (4.2%) from the previous session.

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