[New York Stock Market] Tech Stocks Hit Hard by Sharp Rise in US Treasury Yields... Nasdaq Down 2.18%

by Cho Seulkina

Published 12 Apr.2022 05:19(KST)

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York stock market closed lower on the 11th (local time) as Treasury yields hit their highest levels in three years and concerns over economic slowdown resurfaced. The yield on the 10-year U.S. Treasury bond surpassed 2.78%, marking the highest level since January 2019.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,308.08, down 413.04 points (1.19%) from the previous session. The S&P 500, which focuses on large-cap stocks, fell 75.75 points (1.69%) to 4,412.53, while the tech-heavy Nasdaq dropped 299.04 points (2.18%) to 13,411.96. The small-cap Russell 2000 also declined 14.24 points (0.71%) to close at 1,980.32.

By sector, technology and growth stocks, which are vulnerable to interest rate hikes, showed weakness. Microsoft closed down 3.94% from the previous session. Nvidia’s stock fell 5.20% after Baird downgraded its investment rating to neutral. AMD also slipped 3.59%. Tesla slid nearly 5% amid continued production halts at its Shanghai plant due to the spread of COVID-19 in China, breaking below the 1,000-dollar mark.

Energy stocks also declined as oil prices plunged. Occidental Petroleum fell 6.28%, and Diamondback Energy dropped 4.85%.

However, Twitter’s stock rose 1.69% following news that Elon Musk, CEO of Tesla, decided not to join Twitter’s board of directors. AT&T surged more than 7% on news of the completion of its spin-off of Discovery. Warner Bros. Discovery, newly established from the AT&T spin-off, closed its first trading day up 1.43%. Airline stocks also rose collectively, with Delta Air Lines up 4.0%, Alaska Air Group up 1.01%, American Airlines Group up 2.29%, and Southwest Airlines up 3.35%.

Investors closely watched the Federal Reserve’s moves and the resulting U.S. Treasury yield fluctuations ahead of the Consumer Price Index (CPI) release scheduled for the 12th. The 10-year Treasury yield recorded 2.78%, marking a new high since 2019.

Concerns over inflation remain elevated. On this day, the New York Federal Reserve Bank announced that the median expected inflation rate for the next year, based on last month’s survey, was 6.6%. This is a 10% increase from the previous month’s 6.0%, marking the highest level since the New York Fed began related surveys in 2013. The market expects the March CPI to surge 8.4% year-over-year. White House Press Secretary Jen Psaki also stated in a briefing that "the previous report (February CPI) did not fully reflect the sharp rise in oil and gas prices caused by Russia’s unjust invasion," and "March inflation is expected to be extremely high."

Loretta Mester, President of the Cleveland Federal Reserve Bank, said in an interview with CBS Face the Nation the day before that the Federal Reserve (Fed) can control inflation without causing significant damage to the economy. However, she expressed concern that China’s COVID-19 lockdown measures could worsen supply chain issues and impact U.S. inflation.

International oil prices continued to decline due to the impact of China’s COVID-19 lockdown measures. On this day at the New York Mercantile Exchange (NYMEX), West Texas Intermediate (WTI) crude oil for May delivery closed at $94.29 per barrel, down 4% ($3.97) from the previous trading day. This decline reflects growing concerns that the spread of COVID-19 in China, the world’s largest oil importer, will reduce oil demand. Brent crude for June delivery on the London ICE Futures Exchange also fell 4.2% ($4.30) to $98.48, marking its lowest level since March 16.

Bitcoin prices also plunged on this day. As of 3:54 p.m. Eastern Time, Bitcoin was trading at $39,982.60, down 7.52% from the previous day. This decline followed the 10-year Treasury yield hitting its highest level since 2019 once again. CNBC reported that risky assets like Bitcoin tend to fall when interest rates rise.

The first-quarter earnings season will begin on the 13th, starting with reports from JP Morgan and Delta Air Lines.