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After a regular meeting of the US Federal Reserve (FOMC), US Treasury yields, which seemed to have stabilized somewhat, surged within a day, and the New York Stock Market fell. This is because the FOMC’s “pigeonist” speech was insufficient to calm the soaring inflation concerns. All of the New York Stock Markets fell due to interest rate unrest
On the 18th (local time), 10-year US Treasury bonds ended at 1.71%, up 0.08 percentage points from the previous day. This is the first time since January of last year that the 10-year interest rate has exceeded the 1.7% level. The market’s fear of inflation has risen to the level before the outbreak of Corona 19.
On the New York Stock Exchange (NYSE), which was directly affected by the increase in government bond yields, the Dow index closed at 32,862.30, down 153.07 points (0.46%) from the previous day, and the Standard & Poor’s (S&P) 500 index was 58.66 points (1.48%). The market closed at 3,915.46, which was down.
The index that had the biggest drop was the Nasdaq centered on technology stocks, which fell 409.03 points (3.02%) compared to the previous day to 13,116.17. This is the biggest drop since the 25th of last month. Tesla’s share price plunged 6.9%, and Apple also slid about 3.4%. In general, a rise in government bond yields acts as a negative factor for growth stocks.
At the FOMC regular meeting of the US Federal Reserve that ended the day before, Fed Chair Jerome Powell reaffirmed his position that “it will not move until a positive number appears in employment and inflation for an extended period of time.” This means that even inflation exceeding 2% will be tolerated for at least one or two years. As a result, the market was repulsed to the extent that the Dow index surpassed 33,000 points for the first time, but the situation changed sharply within a day. This is because concerns about inflation have not been properly resolved.
The Fed’s sharp increase in its economic outlook the day before also stimulated inflation concerns. The Fed raised its US growth forecast this year from 4.2% to 6.5%, and raised its inflation forecast from 1.8% to 2.4%. As awareness of the economic situation has improved, there has been a growing awareness that inflation can come faster and stronger. The prediction that the Central Bank of Japan (BOJ) will tighten earlier than expected also seems to have had an impact.
In the aftermath of a surge in US Treasury yields, the KOSPI index was weak in the morning. As of 11:30 a.m. that day, KOSPI is trading at 3,033.16, down 1.07% (32.85 points) compared to the previous day. As foreigners and institutions are selling strongly, individuals who are buying KRW 1 trillion alone are being pushed back.
Kwak Joo-hyun reporter [email protected]
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