[New York Close] Long-Term Surge Fatigue Leads to Sharp Drop... Nasdaq Down 1.50%

The three major indices of the U.S. New York stock market all closed lower on the 20th (local time) due to fatigue from a prolonged surge. The Dow Jones Industrial Average, which had been hitting record highs for consecutive days, turned downward after 10 trading days.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 37,082.00, down 475.92 points (1.27%) from the previous session. The large-cap focused S&P 500 index fell 70.02 points (1.47%) to 4,698.35, and the tech-heavy Nasdaq index dropped 225.28 points (1.50%) to close at 14,777.94.

The New York market started lower in early trading but reversed to gains on the back of favorable economic data. However, cautious remarks from Federal Reserve (Fed) officials and weak demand in the 20-year Treasury bond auction increased profit-taking appetite. The CBOE Volatility Index (VIX), known as Wall Street’s fear gauge, surged 9.10% to 13.67 compared to the previous session.

Keith Buchanan, Senior Portfolio Manager at Globolt Investment, said, "The market was already in an overbought state, so a correction like today’s is natural under these conditions," adding, "Today’s decline is more technical than fundamental."

[Image source=Reuters Yonhap News]

All 11 major sectors within the S&P 500 index declined. Among individual stocks, transportation company FedEx plunged 12%, the largest drop among S&P 500 components, due to disappointing quarterly results below market expectations and a forecast of weakening demand. Among big tech stocks, Tesla (-3.9%) and Nvidia (-3.0%) posted the largest declines. Alphabet (Google) bucked the downtrend, rising 1.2% and hitting a 52-week high.

On this day, a Fed official stated that the Fed would not immediately cut interest rates. Patrick Harker, President of the Federal Reserve Bank of Philadelphia, said in an interview with radio station WHY, "I don’t think the Fed needs to raise rates further," but added, "The fight against inflation is not over yet." He said that while the time to lower rates will come, no immediate action is expected, and the process of a soft landing for the economy could be challenging.

Consumer investment sentiment improved. The Conference Board announced that the U.S. Consumer Confidence Index for December was 110.7, a significant increase from the revised 101 in the previous month. This also exceeded the market expectation of 104.5. The consumer confidence index rose for the second consecutive month. The December expectations index rose sharply to 85.6 from the previous month. The November figure was revised to 77.4.

Housing indicators showed signs of recovery as mortgage rates fell alongside declines in Treasury yields. November existing home sales, seasonally adjusted, increased 0.8% month-over-month to an annual rate of 3.82 million units. This contrasted with economists’ forecasts compiled by The Wall Street Journal, which expected a 0.8% decrease to 3.76 million units.

International oil prices continued to rise for the third consecutive day amid concerns over supply disruptions due to geopolitical risks in the Red Sea. On the New York Mercantile Exchange (NYMEX), West Texas Intermediate (WTI) crude oil for February delivery closed at $74.22 per barrel, up 28 cents (0.38%) from the previous day. WTI prices have surged 3.91% over the past three trading days.

The rise in oil prices is due to expectations of inevitable energy supply disruptions as global shipping companies and oil firms halt or reroute their vessels amid the paralysis of the Red Sea route. Following indiscriminate attacks on civilian ships in the Red Sea, which connects the Mediterranean and Indian Ocean via the Suez Canal, major global shipping companies such as Denmark’s Maersk, Switzerland’s MSC, France’s CMA CGM, and Germany’s Hapag-Lloyd, along with oil companies, have decided to suspend or reroute their vessels navigating the Red Sea, causing ongoing logistical chaos.

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