[New York Stock Market] Another Decline Amid Tightening Concerns... Dow Down 0.71%

Major indices on the U.S. New York Stock Exchange closed lower on February 28, the last trading day of the month (local time). Although the market showed slight gains early in the session due to Target's earnings boost, it could not shake off the tightening concerns that weighed on the market throughout the month. The 10-year U.S. Treasury yield approached the psychological resistance level of 4%.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 232.39 points (0.71%) from the previous close to finish at 32,656.70. The large-cap S&P 500 index dropped 12.09 points (0.30%) to 3,970.15, while the tech-heavy Nasdaq index closed down 11.44 points (0.10%) at 11,455.54.

The three major indices, which had shown a strong rally at the beginning of the year, all retreated throughout February. This was due to growing concerns that the Federal Reserve (Fed) would maintain interest rates at a higher level than expected, following strong employment, consumption, and inflation data. The Dow fell about 4.19% over the month. The S&P 500 and Nasdaq also declined by 2.61% and 1.11%, respectively.

[Image source=Reuters Yonhap News]

Eight sectors of the S&P 500, excluding materials, communication services, and financials, all declined. Retail giant Target posted better-than-expected Q4 earnings, rising 1.01% from the previous close. In contrast, Norwegian Cruise Line shares dropped more than 10% due to worse-than-expected quarterly losses.

Amid ongoing tightening concerns surrounding the Fed, investors closely watched Treasury yield movements, corporate earnings, and economic indicators. Target reported Q4 2023 earnings per share of $1.89, surpassing market expectations of $1.40. However, it provided an annual guidance of $7.75 to $8.75, lower than Wall Street estimates, raising concerns about future performance.

The economic data released that day was generally weak. The Conference Board's Consumer Confidence Index for February fell to 102.9, the lowest in three months, below January's 106 and the market expectation of 108.5. Notably, the Conference Board's Expectations Index dropped to 69.7, below 80. A reading below 80 suggests a potential recession within 12 months.

The January goods trade deficit increased by $1.8 billion (2.0%) from the previous month to $91.5 billion, marking the largest deficit in three months. The S&P Case-Shiller National Home Price Index for December rose 5.8% year-over-year, slowing from the 7.6% increase recorded the previous month.

Tightening concerns persisted. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the probability of a 0.5 percentage point rate hike (a "big step") in March rose to the 20% range. The likelihood of a 0.25 percentage point increase was 76.7%, while a 0.50 percentage point hike stood at 23.3%. Although a 0.25 percentage point hike remains the consensus, the market's tightening concerns have intensified accordingly.

Ostan Goolsby, President of the Federal Reserve Bank of Chicago, noted at an event that policymakers should not rely too heavily on financial market reactions, citing time lags in economic data. He emphasized the need to find clues in the real economy rather than just economic indicators. Minutes from the last FOMC meeting revealed that three regional Fed presidents?from Minneapolis, St. Louis, and Cleveland?advocated for a big step hike.

U.S. Treasury yields also rose. In the New York bond market, the 10-year yield briefly surged to 3.98%. The 2-year Treasury yield also hit its highest level in 16 years.

Shima Shah, Global Equity Strategist at Principal Asset Management, commented, "During February, it became clear that the U.S. economy is not adequately responding to the Fed's rate hikes. This means the labor market remains tight, inflationary pressures are still strong, and the slowdown will not be straightforward."

Oil prices rebounded on bargain buying. On the New York Mercantile Exchange, April delivery West Texas Intermediate (WTI) crude closed at $77.05 per barrel, up $1.37 (1.8%) from the previous close.

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