[New York Stock Market] Declines Amid FOMC Caution... Nasdaq Down 0.89%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York Stock Exchange closed lower on the 1st (local time), as they closely monitored the Federal Reserve's (Fed) Federal Open Market Committee (FOMC) regular meeting, which began a two-day schedule. Attention is focused on whether hints of a slowdown in December will emerge at this meeting, while the release of indicators showing the U.S. labor market remains robust is expected to influence the Fed's decision.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 32,653.20, down 79.75 points (0.24%) from the previous session. The S&P 500, centered on large-cap stocks, fell 15.88 points (0.41%) to 3,856.10, and the tech-heavy Nasdaq dropped 97.30 points (0.89%) to 10,890.85.

By sector, stocks related to telecommunications services and consumer goods showed notable declines. Alphabet (Google) closed down 4.27%, Netflix fell 1.76%, and Amazon dropped 5.52%. Newell Brands slid 3.26%, and Etsy declined 2.64%.

Meanwhile, Abiomed, a manufacturer of cardiac medical devices, surged nearly 50% following the announcement that Johnson & Johnson would acquire it for $16.6 billion. After remarks from a U.S. Federal Communications Commission (FCC) official calling for a ban on TikTok, shares of Meta and Snap jumped 2.19% and 3.43%, respectively.

Pharmaceutical company Pfizer rose 3.14% after exceeding expectations and raising its annual outlook. Uber climbed nearly 12% despite quarterly losses, as its fourth-quarter forecast surpassed expectations. Conversely, Goodyear Tire fell 14.88% due to cost increases and a strong dollar, resulting in earnings below expectations.

Investors focused on the two-day November FOMC regular meeting, economic indicators, and corporate earnings released on this day.

The number of job openings released on this day showed that despite ongoing concerns about economic slowdown, labor demand from U.S. companies remains strong. According to the September Job Openings and Labor Turnover Survey (JOLTS), the number of job openings in U.S. companies in September was 10.7 million, up from 10.3 million in August. This figure far exceeded the expert forecast of 9.8 million. The ratio of job openings per unemployed person, which the Fed monitors, fell to 1.7 in August but rose again to 1.9 in September.

With this indicator confirming that the labor market remains resilient and upward inflationary pressures persist, there is speculation that it could influence the Fed's decision. The New York stock market, which started the day in positive territory, turned negative due to the employment data impact. CNBC interpreted this as rising fears that the Fed may maintain a hawkish stance to lower high inflation. Randy Frederick, director at Schwab Center for Financial Research, commented, "The good news is that it means the Fed will tighten more, which the market does not like."

Currently, the Fed is widely expected to implement an additional giant step (0.75 percentage point rate hike) at the November FOMC meeting. If so, the benchmark interest rate will reach 3.75?4.00%, the highest level since the end of 2007. Especially amid concerns that excessive tightening could trigger a recession, the Fed is reportedly considering slowing the pace to a 0.5 percentage point increase starting in December, drawing attention to Fed Chair Jerome Powell's press conference following this FOMC meeting.

According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds (FF) rate futures market currently prices in an over 87% probability of a 0.75 percentage point hike in November. The probability of a 0.5 percentage point hike in December stands at 44.7%, while a 0.75 percentage point hike is at 49.2%.

The press conference is expected to focus not only on the future path of inflation, the labor market, and recession assessments but also on comments regarding the recently highlighted instability in the U.S. Treasury market. Ed Moya of OANDA said that due to the employment data, he expects a hawkish tone at the press conference on the 2nd. Lauren Goodwin, portfolio strategist at New York Life Investments, expressed concern that investors might be too excited about potential changes from the Fed, stating, "A pause is different from a pivot. If economic conditions worsen, the Fed may gradually shift policy at some point, but a complete reversal is very unlikely."

On the same day, the U.S. October ISM Manufacturing PMI was reported at 50.0. The PMI indicates expansion or contraction based on a threshold of 50. The October S&P Global Manufacturing PMI (final) also exceeded the baseline at 50.4 but retreated compared to the previous month.

The bond market showed mixed trends. In the New York bond market, the yield on the 10-year U.S. Treasury briefly slipped to 3.92% during the session before barely recovering to the 4% level. Meanwhile, the 2-year yield, sensitive to monetary policy, rose to around 4.55%. The inversion of the yield curve, where short-term yields such as the 3-month (4.15%) and 2-year exceed the long-term 10-year yield, continued. This is generally considered a precursor to a recession. Given that the Fed has been monitoring the 3-month yield, related questions are expected to flood Chair Powell's press conference the following day.

Oil prices rose due to concerns over geopolitical risks in the Middle East. On the New York Mercantile Exchange, the December West Texas Intermediate (WTI) crude oil price closed at $88.37 per barrel, up $1.84 (2.13%) from the previous session.

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