(New York = Yonhap News) Correspondent Oh Jin-woo of Yonhap Infomax = This week (March 1-5) The New York Stock Market is expected to continue an unstable trend, keeping an eye on the trend of US Treasury yields.
The question remains whether Jerome Powell, chairman of the Fed, will be able to ease the rise in interest rates.
As key economic indicators such as US employment in February are released, sensitivity to indicators may increase.
Investors are paying attention to whether a rise in US Treasury yields will turn the financial market into a new phase. If interest rates rise in a trend, investors’ asset composition is also inevitable.
In particular, if the rate of interest rate rises rapidly like last week, anxiety may increase. With the 10-year Treasury bond rate rising to the 1.5% level, the fate of the stock market is bound to change depending on how fast it will rise.
It is of paramount importance whether the Fed, including Fed Chairman Powell, will control the rate hike.
In his testimony to Congress last week, Chairman Powell repeatedly expressed his willingness to maintain the easing policy, including that it could take three years or more to reach the inflation target. Interest rates seemed to have settled somewhat at Chairman Powell’s remarks, but soon resumed the surge.
In addition, some Fed officials said the rise in interest rates was due to an improved economic outlook and evaluated that there was nothing wrong with it.
As expected by some of the market, there are still no signs that it will continue to hold interest rates through measures such as expanding long-term bond purchases.
Chairman Powell will speak at a conference hosted by The Wall Street Journal on the 4th. The market’s attention is expected to be focused on whether to express a direct warning or willingness to respond to rising interest rates.
Some say it may be difficult for Powell to come up with more than what he said last week.
In the second half of the week, the US employment data for February are released. The outlook is that employment will improve due to the calm of the new coronavirus infection (Corona 19) crisis.
According to the Wall Street Journal statistics, experts predicted that employment would improve from an increase of 49,000 in January to an increase of 218,000 in February. The unemployment rate is expected to remain at the same level at 6.3%.
The problem is that, if employment is good, inflation concerns will increase in the future and interest rates may rise sharply. As interest rates have become a key variable that drives stock prices, the stock market may become unstable due to strong indicators.
In addition to employment, the Supply Management Association (ISM)’s February Manufacturing and Service Purchasing Managers Index (PMI) are also key indicators that can affect the market.
As inflation has become a key point, interest in the Eurozone’s February Consumer Price Index (CPI) is also expected to draw attention.
Optimism about the control of Corona 19 is expected to continue, such as approval of a vaccine developed by Johnson & Johnson (J&J).
It should also be noted that the Senate discusses the US$1.9 trillion stimulus package.
Conflict may arise in the Senate over the proposed minimum wage increase. The Secretary General of the Senate decided that the plan to increase the minimum wage could not be included in the stimulus bill through budget adjustment.
As a result, news came out that the Democratic Party is considering a plan to reorganize the tax system to allow companies to raise wages. It has been reported that large corporations that pay below standard wages should be penalized with tax, and SMEs should be encouraged to raise wages with tax benefits.
Attempts to raise wages by mobilizing a tax may also make companies uneasy.
However, the prevailing prospect is that the stimulus measures, excluding the minimum wage, will eventually pass.
Meanwhile, last week, the New York stock market fell sharply, led by technology stocks due to a surge in interest rates.
The Dow Jones 30 Industrial Average fell by about 1.8%. The Standard & Poor’s (S&P) 500 index fell by 2.5%, while the NASDAQ plunged 4.9%.
◇Main presentations and speeches this week
Employment metrics are key this week. Fed officials also pour out their comments.
On March 1, ISM and information provider IHS Markit’s February manufacturing PMI will be announced. January construction spending is also coming out. New York Governor John Williams and Fed Director Rael Brainerd will speak. Zoom video announces performance.
On the 2nd, ISM-New York’s February Business Conditions Index is released. Brainerd Fed Director and Mary Daily San Francisco Yeon-eun will speak. Targets, etc. produce results.
On the 3rd, the February ADP Private Employment Report and ISM and Markit’s February Service Industry PMI will be released. The Fed releases a beige book. Philadelphia Yeoneun Governor Patrick Harker and Chicago Yeoneun Governor Charles Evans speaks.
On the 4th, the number of weekly unemployment insurance claimants and factory reorders in January are announced. Chairman Powell speaks.
On the 5th, the non-agricultural employment index for February comes out. January’s trade balance and consumer credit are also announced.
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2021/02/28 07:00 sent