by Cho Seulkina
Published 23 Apr.2022 05:19(KST)
[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York Stock Exchange continued to decline on the 22nd (local time) due to the hawkish remarks by Jerome Powell, Chair of the Federal Reserve (Fed). Investors focused on corporate earnings and interest rate hikes, resulting in all three major indices recording losses in the 2% range. In particular, the Dow Jones Industrial Average experienced its largest drop since October 2020.
On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,811.40, down 981.36 points (2.82%) from the previous session. The large-cap S&P 500 index fell 121.88 points (2.77%) to 4,271.78, and the tech-heavy Nasdaq index dropped 335.36 points (2.55%) to close at 12,839.29.
By individual stocks, those that reported earnings below market expectations saw more pronounced declines. HCA Healthcare fell more than 20% compared to the previous session. Intuitive Surgical closed down 14.34%, Universal Health Services dropped 13.96%, and DaVita slid 9.17%.
Verizon fell nearly 6% following news of a decline in cellphone subscribers. Gap dropped about 18% after Nancy Green, CEO of its Old Navy division, resigned. The company has also lowered its earnings outlook for the year.
Snap, which reported earnings below expectations, rose more than 1% as news of an increase in daily active users raised hopes for future earnings improvement.
Investors closely monitored corporate earnings reports and economic indicators alongside the possibility of tightening following Chair Powell’s remarks the previous day.
Chair Powell officially indicated at an International Monetary Fund (IMF) panel discussion that a big step of a 0.5 percentage point increase in the May benchmark interest rate could be implemented. He specifically mentioned a front-loaded approach of raising rates sharply early in the hiking cycle, suggesting that such big steps could continue not only in May but also in subsequent meetings.
With expectations of aggressive Fed tightening, downward pressure on stock prices increased on the day. Ross Mayfield, investment strategy analyst at Baird, said, "The central bank’s hawkish stance and bond yields are once again moving the stock market." Janet Geraty, chief economist at Robertson Asset Management, commented, "This is all related to Chair Powell’s remarks," adding, "Many companies’ earnings reports include warnings about future revenue growth. Fighting inflation will cause pain."
Loretta Mester, President of the Cleveland Federal Reserve Bank, said in an interview with CNBC that she would support a 0.5 percentage point rate hike when asked about the possibility of a 0.75 percentage point increase.
In the bond market, the 10-year Treasury yield fell slightly but remained in the 2.9% range, still eyeing the 3% level.
The U.S. manufacturing and services indicators released on the day showed mixed results. The preliminary April manufacturing Purchasing Managers’ Index (PMI) compiled by S&P Global rose to 59.7, marking a seven-month high. In contrast, the preliminary April services PMI fell to 54.7, the lowest in three months.
Oil prices declined amid dollar strength driven by tightening concerns and worries over slowing demand in China. On the New York Mercantile Exchange, June West Texas Intermediate (WTI) crude oil closed at $102.07 per barrel, down $1.72 (1.7%) from the previous session.
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