[Asia Economy New York=Correspondent Baek Jong-min] The rise in U.S. Treasury yields once again hindered the New York stock market. This is interpreted as being due to President Joe Biden's announcement that COVID-19 vaccines will be secured for the entire population by May, which stimulated expectations for economic recovery.
On the 3rd (local time) at the New York Stock Exchange, the Dow Jones Industrial Average fell 0.39% to 31,270.09, the S&P 500 index dropped 1.32% to 3,819.72, and the Nasdaq index plunged 2.7% to 12,997.75.
The Nasdaq gave back all the gains it had recovered in the first trading day of the week after two consecutive days of sharp declines. The Dow also failed in its attempt to rise and ended down.
On that day, the 10-year U.S. Treasury yield rose from 1.413% the previous day to 1.47%, shaking investor sentiment toward risk assets. The Treasury yield even rose intraday to 1.49%, approaching the 1.5% level. Although the yield is still below the 1.6% level recorded last week, it remains at a level that could spread inflation concerns.
The yield spread between the 5-year Treasury note and the 5-year Treasury Inflation-Protected Securities (TIPS), which reflects expected inflation over the next five years, widened to 2.50%. This is the highest level since 2008.
As U.S. Treasury yields stirred again ahead of Federal Reserve Chairman Jerome Powell's remarks, the market is paying close attention to how Chairman Powell will respond.
Technology stocks, which are greatly affected by rising Treasury yields, fell one after another. Apple, Amazon, Microsoft, and Alphabet all dropped by around 2%, while Netflix plunged 5%. Tesla also fell by 4.8%.
Stocks sensitive to economic recovery showed strength amid expectations of expanded vaccine distribution. American Airlines rose 3.4%, Carnival and Norwegian Cruise Line increased by 3.9% and 6.3%, respectively. The energy sector also rose 1.4%. Aluminum-related company Alcoa's stock surged 12%.
However, economic indicators released that day fell short of expectations. Private employment survey firm ADP announced that private sector jobs increased by 117,000 in February, which is lower than the market expectation of 225,000.
The Institute for Supply Management (ISM) reported that the February Non-Manufacturing Purchasing Managers' Index (PMI) contracted to 55.3 compared to January. This also failed to meet the market expectation of 58.7.
The April West Texas Intermediate (WTI) crude oil price closed up $1.53 (2.6%) at $61.28 per barrel.
Due to the impact of rising Treasury yields, the April gold price fell $17.80 (1%) to close at $1,715.80. Gold prices threatened the $1,700 level intraday, marking the lowest point in nine months.
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