(New York = Yonhap News) Correspondent Oh Jin-woo of Yonhap Infomax = Major indexes in the New York Stock Market fell sharply in the aftermath of another surge in US Treasury yields.
On the 25th (US time) on the New York Stock Exchange (NYSE), the Dow Jones 30 Industrial Average closed at 31,402.01, down 559.85 points (1.75%) from the battlefield.
The Standard & Poor’s (S&P) 500 index plunged 96.09 points (2.45%) from the battlefield to 3,829.34, while the technology stocks Nasdaq index fell 478.54 points (3.52%) to 13,119.43.
The NASDAQ recorded the largest daily decline since the end of October last year.
The market watched the rising US interest rates and key economic indicators.
Chairman Jerome Powell and other key members of the Federal Reserve have made easing comments one after another, but the rise in US interest rates has seldom subsided.
In his testimony to the House of Representatives the previous day, Chairman Powell reiterated his view that it will take more than three years to achieve the price target, and that the easing policy will be maintained for a considerable period of time.
Interest rates, which seemed to decline after Powell’s testimony, surged again this day. The interest rate of 10 US Treasury bonds has also surpassed 1.5%. CNBC reports that the 10-year interest rate has soared to 1.6% during the week.
The accelerated economic recovery and the outlook for inflation are putting steady upward pressure on interest rates. In addition, the fact that the results of the US Treasury’s Treasury Bond bids that were conducted on the same day were sluggish also fueled the rise in interest rates.
Considering the improved economic outlook, Fed officials have also commented that rising interest rates at the current level is not a problem.
St. Louis Federal Reserve Bank President James Bourd said, “Considering the economic outlook, a 10-year increase in US Treasury bonds is appropriate.”
Atlanta Yeon of Rafael Bostik also said, “I’m not worried about the rise in bond rates yet,” he said. “By historical standards, interest rates are still low.”
“The underlying inflationary pressures will remain quiet for the time being,” said New York Governor John Williams, but he did not subside the rise in interest rates.
As interest rates rose sharply, stock market anxiety intensified, centered on high-value technology stocks.
In particular, the fact that the 10-year U.S. Treasury bond yield exceeded the dividend yield of about 1.48% of the S&P 500 index, aggravating anxiety. The fact that the dividend yield of stocks, which is a risky asset, is lower than the interest rate of government bonds, which is a safe asset, means that the investment is less attractive.
The major economic indicators released on the day were good, but they were perceived as the basis for an interest rate rise and did not contribute to the stock price.
The U.S. Department of Labor announced last week that the number of unemployment insurance claims fell 111,000 from the previous week to 730,000 (seasonal adjustment). It was significantly below the expert estimate of 845,000 people compiled by The Wall Street Journal, the lowest since the end of November last year.
The preliminary growth rate for the U.S. for the fourth quarter of last year was also raised by 0.1 percentage points from the breaking level to 4.1% per year. It was slightly below the market forecast of 4.2% growth.
In addition, the Ministry of Commerce announced that the January durable goods orders increased 3.4% from the previous month. It exceeded the market forecast of 1.0%.
By stock on this day, GameStop shares, which surged more than 100% the previous day, rose by 18.6%. However, volatility was extreme as it rose to about $180 per share during the intraday and then slipped to around $100. The volatility of some stocks attracted by individual investors, such as Gamestop, has triggered anxiety across the market.
By industry on this day, technology stocks plunged 3.53% amid a decline in all industries. Financial stocks, which are considered to be beneficiaries of rising interest rates, also fell 1.81%.
New York stock market experts feared that the burden of rising US interest rates could continue.
“The US stock market will continue to be closely affected by fluctuations in government bond rates,” said Edward Moya, chief market researcher at Oanda. “Nasdaq could continue to lead the downtrend.”
“Some investors will prefer to switch to REITs, consumer staples, finance and utilities,” he added.
According to the Chicago Merchandise Exchange (CME) Fed Watch, the FF interest rate futures market reflects the possibility of a 25bp base rate hike in September. It was 0% reflected a month ago.
On the Chicago Options Exchange (CBOE), the volatility index (VIX) recorded 28.89, up 35.38% from the previous trading day.
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2021/02/26 06:42 sent