Dow Jones Hits Record High for 3 Consecutive Days... Nasdaq Shows Mixed Trends Again (Comprehensive)

Despite Strong Economic Indicators, Fed Rate Hike Caution Remains

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The New York stock market closed mixed for the second consecutive day due to the impact of the possibility of interest rate hikes. The Dow Jones Industrial Average recorded an all-time high for the third consecutive day, but the Nasdaq index, expected to be affected by rising interest rates, showed weakness.

On the 5th (local time), the Dow Jones Industrial Average closed at 34,230.34, up 97.31 points (0.29%), and the S&P 500 index closed at 4,167.59, up 2.93 points (0.07%). Meanwhile, the Nasdaq index closed down 51.08 points (0.37%) at 13,582.42.

Although the Nasdaq index showed strength early in the session, buying momentum decreased and it reversed to a decline. The strong economic indicators released that day are interpreted as having rekindled concerns about rising interest rates.

The previous day, U.S. Treasury Secretary Janet Yellen said, "We may need to raise interest rates somewhat to prevent our economy from overheating." Secretary Yellen later clarified at an event hosted by the Wall Street Journal (WSJ) that her earlier remarks did not "predict or recommend" a rate hike, which seemed to stabilize investor sentiment, but the strong economic data released that day again stirred anxiety.

The Wall Street Journal also judged Yellen's remarks as implying that the administration is prepared for the Fed to raise interest rates. It is analyzed that the Fed gave a signal that it does not need to delay rate hikes considering the administration's stance. Fed Chair Jerome Powell has been criticized for being passive about rate hikes as his term nears expiration.

According to the ADP National Employment Report released that day, private sector employment increased by 742,000 in April, the largest monthly increase since September 2020. However, this figure fell short of the market forecast of an 800,000 increase compiled by WSJ.

Many experts expect nonfarm payrolls in April to exceed 1 million. The expert forecast compiled by Dow Jones is 978,000.

If further improvement in the labor market is confirmed in the April employment data to be released by the Department of Labor on the 7th, the Federal Reserve (Fed) may not rule out the possibility of an early rate hike, a perception that seems to be spreading.

The U.S. service sector indicator released that day also confirmed the strength of the current U.S. economy. The final April Services Purchasing Managers' Index (PMI) released by IHS Markit rose to 64.7 from the previous month's confirmed 60.4. This is a record high exceeding the market expectation of 63.3.

Fed officials also expressed the view that an accommodative stance should still be maintained. Fed Governor Michelle Bowman said that this (economic) strength is expected to continue for the next few months but assessed that monetary policy is in a good position.

Fed Vice Chair Richard Clarida also said, "We have not yet made significant progress" and "I do not think it is time to discuss tapering asset purchases."

However, market interest rates actually fell. The U.S. 10-year Treasury yield fell 0.022 percentage points to 1.57%. A decline in Treasury yields means a rise in bond prices.

Apple, which led the sharp decline in tech stocks the previous day, rebounded 0.2%. Tesla continued its decline, falling 0.39%.

General Motors (GM) shares rose more than 4% as earnings exceeded expectations despite supply disruptions caused by semiconductor shortages.

Moderna fell more than 6% after Katherine Tai, U.S. Trade Representative (USTR), expressed support for waiving patents on COVID-19 vaccines. Shares of BioNTech, which co-developed the vaccine with Pfizer, also fell more than 3%.

Shares of Uber, Lyft, and DoorDash plunged on news that the U.S. Department of Labor invalidated a regulation that made it easier to classify temporary workers established during the Trump administration as independent contractors.

Cryptocurrencies were mostly strong. Bitcoin traded at around $56,800, up 3.8%, and Ethereum traded at around $3,400, up 1.7%. Dogecoin rose 10%, trading at around 60 cents.