[New York Stock Market] Awaiting Inflation Data, Volatility on UK Intervention... Nasdaq Down 1.10%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices of the U.S. New York stock market closed mixed on the 11th (local time), amid growing recession concerns and uncertainty, as investors awaited the inflation data to be released this week. Financial market worries originating from the UK also shook the New York stock market once again. The market, which had rebounded due to additional intervention by the Bank of England (BOE), slipped again after Governor Andrew Bailey stated that "market intervention will soon end as scheduled."

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 36.31 points (0.12%) from the previous close to finish at 29,239.19. The large-cap focused S&P 500 index closed down 23.55 points (0.65%) at 3,588.84, and the tech-heavy Nasdaq index fell 115.91 points (1.10%) to 10,426.19. The Nasdaq closing price is the lowest since July 2020.

By individual stocks, weakness in interest rate-sensitive tech stocks was confirmed. Tesla closed down 2.90% from the previous session. Microsoft (-1.68%), Apple (-1.03%), and Amazon (-1.28%) also declined together. Meta dropped nearly 4% after news surfaced that it was added to Russia's terrorism-related list. Semiconductor stocks including Qualcomm also showed a downward trend.

Leading financial stocks such as JPMorgan Chase (-2.89%), Citi (-2.76%), and Wells Fargo (-2.94%), which are set to report earnings this week, also fell in succession. CNBC analyzed that concerns about the need for companies to secure reserves for bad loans due to the recession were the background. Due to falling oil prices, ExxonMobil dropped 0.85%, and Occidental Petroleum fell 2.44%.

Investors on this day monitored U.S. Treasury yield movements and recession concerns while awaiting the Consumer Price Index (CPI) to be released on the 13th and the third-quarter corporate earnings season.

In the New York bond market, the U.S. 10-year Treasury yield briefly surpassed 4% during the session but stabilized again around 3.93%. The 4% level was reached for the first time since the 28th of last month. The 2-year yield, sensitive to monetary policy, also rose to around 4.3%.

The U.S. Treasury yields, which surged during the session, showed signs of stabilization and reduced gains after news of additional BOE intervention was disclosed. On the same day, the BOE decided to intervene again by adding index-linked government bonds to its bond purchase program after yields continued to rise despite long-term bond purchases. This was the third market intervention since the UK government announced a mini-budget last month, including a ?43 billion (69 trillion won) tax cut plan.

Following this news, the stock market rose for a change. However, in the afternoon of the same day, the U.S. stock market came under downward pressure again after the BOE announced it would soon end market intervention. Governor Bailey confirmed in a speech that day, "There are three days left," and that market intervention would be stopped as expected. The exchange rate, which was $1.115 per pound just before the statement was released, fell to $1.098 afterward.

On this day, the International Monetary Fund (IMF) once again lowered its global economic growth forecast for next year to 2.7% in its World Economic Outlook report. Initially, the IMF projected a 3.8% growth rate for next year in January, then lowered it to 3.6% in April, 2.9% in July, and now cut it by another 0.2 percentage points. Compared to the beginning of the year, this is a total reduction of 1.1 percentage points. The IMF diagnosed that "along with soaring inflation, the global economy is experiencing a sharper and broader slowdown than expected," and that the inflation-driven household cost-of-living crisis, monetary tightening in many regions, Russia's invasion of Ukraine, and prolonged COVID-19 are all weighing heavily on the economic outlook.

However, it also recommended that central banks maintain their current path toward monetary policy normalization. Pierre-Olivier Gourinchas, IMF Chief Economist, said at a briefing immediately after the report release, "Our recommendation is that central banks should maintain their (monetary policy) path," adding, "This does not mean they should accelerate what they are currently doing, but it also does not mean they should stop the path of monetary normalization."

Additionally, investors are awaiting inflation indicators to be released later in the week. These will likely be used to gauge the pace of the Fed's aggressive tightening. The Producer Price Index (PPI) will be released on the 12th, the CPI on the 13th, and retail sales data on the 14th to assess consumer conditions. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) futures market currently reflects an over 84% chance of a giant step (0.75 percentage point rate hike) in November. Despite repeated recession warnings, there is a strong bet that the Fed will continue its efforts to curb inflation.

Loretta Mester, President of the Cleveland Federal Reserve Bank, said in a speech on this day, "The U.S. economy could enter a recession with growth rates well below trend for the next few years." However, she emphasized again that "nothing is painless, but the high inflation we are experiencing is already causing pain for many," and that high interest rate levels must be maintained for the time being.

Oil prices fell below $90 per barrel amid growing global recession concerns. At the New York Mercantile Exchange, November West Texas Intermediate (WTI) crude oil prices closed at $89.35 per barrel, down $1.78 (1.95%) from the previous session.

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