New York Stock Market Stumbles Amid Sharp Rise in U.S. Treasury Yields

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] U.S. Treasury yields surged above 1.3% amid inflation concerns. Inflation worries pushed bond yields higher, especially on long-term bonds, causing the U.S. stock market to close mixed.

On the 16th (local time), the Dow Jones Industrial Average rose 64.35 points (0.2%) to close at 31,522.75, the S&P 500 index fell 2.24 points (0.06%) to 3,932.59, and the Nasdaq index dropped 47.97 points (0.34%) to 14,047.50.

All three major New York stock indices showed gains early in the session but were held back by the sharp rise in U.S. Treasury yields. The S&P 500 and Nasdaq turned lower near the close.

The 10-year U.S. Treasury yield surged to 1.3% on the day, marking a sharp increase of 0.1 percentage points. This is the highest level since February last year. The 30-year yield rose to 2%.

Reasons cited for the surge in Treasury yields include expectations of economic recovery leading to increased inflation, and the possibility of expanded Treasury issuance due to the $1.9 trillion stimulus package. Nasdaq tech companies, which are most affected by rising Treasury yields, all turned weak.

Rising Treasury yields are a negative factor for risk assets such as stocks. Gold prices also fell sharply by 1.3% on the day, breaking below the $1,800 level, which is seen as a result of the rise in Treasury yields.

When Treasury yields rise, the burden on governments and households, which saw significant debt increases due to the COVID-19 pandemic last year, expands and can also weigh on the recovering economy.

For this reason, Federal Reserve (Fed) officials have repeatedly denied the possibility of inflation. Mary Daly, President of the San Francisco Fed, stated in a speech on the day, "We are not concerned about inflation and believe the Fed has sufficient ability to manage even if inflation rises above 2%."

James Bullard, President of the St. Louis Fed, is monitoring inflation but said that a tightening monetary policy is not imminent.

Due to an unusual cold wave in the Texas region, West Texas Intermediate (WTI) crude oil surpassed $60 per barrel for the first time in about a year, lifting stock prices in oil-related sectors.