[New York Close] Market Falters Amid Powell's Economic Concerns

by Paek Jongmin

Published 14 May.2020 06:23(KST)

Updated 14 May.2020 06:36(KST)

[Asia Economy New York=Special Correspondent Baek Jong-min] Jerome Powell, Chairman of the Federal Reserve (Fed), raised concerns about the economic situation, dragging down the New York stock market for two consecutive days.

On the 13th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 516.81 points (2.17%) to close at 23,247.97, the S&P 500 index dropped 50.12 points (1.75%) to 2,820.00, and the Nasdaq declined 139.38 points (1.55%) to finish at 8,863.17.

[Image source=Reuters Yonhap News]

The market focused on Chairman Powell's economic assessment released before the opening. In a virtual lecture at the Peterson Institute for International Economics, Powell stated that the future economy is "very uncertain and could face serious downside risks."

Powell warned that while the economy would recover significantly after the coronavirus is controlled, the pace of recovery may not be as fast as desired, emphasizing the need for additional stimulus measures. He clearly drew a line on negative interest rates, stating that it is not a policy currently under consideration.

The US-China conflict also pressured the market. President Trump resumed criticism of China via Twitter, saying, "The world has been hit by a pandemic from China." He also pointed out that even 100 trade agreements could not compensate for the innocent deaths caused by COVID-19.

On the same day, David Tepper, founder of Appaloosa Management and a famous hedge fund manager, pointed out that the stock market is the second most overvalued in history since the dot-com bubble. This means that stock prices have not reflected the downward revisions in earnings forecasts caused by COVID-19.

By stock, General Electric (GE) fell 3.5%, hitting its lowest price in 29 years. Along with GE, airline-related stocks collectively widened their losses.

International oil prices fell by 2%. At the New York Mercantile Exchange (NYMEX), June delivery West Texas Intermediate (WTI) crude oil closed at $25.29 per barrel, down 1.9% (49 cents). Brent crude also dropped about 2%, falling below the $30 mark and trading in the $29 range. Gold closed at $1,716.40 per ounce, up 0.6% (9.60 dollars) from the previous day.