[Asia Economy New York=Correspondent Baek Jong-min] Major indices on the New York Stock Exchange collapsed weakly after being hit by a series of 'strong punches' from concerns over the Omicron COVID-19 variant and the Federal Reserve's (Fed) indication of an early completion of asset purchase tapering.
On the 30th (local time), the Dow Jones Industrial Average closed at 34,483.72, down 652.22 points (1.86%) from the previous session, the S&P 500 index fell 88.27 points (1.90%) to 4,567.00, and the Nasdaq index dropped 245.14 points (1.55%) to 15,537.69.
On that day, major indices on the New York Stock Exchange started weak due to Moderna CEO St?phane Bancel expressing skepticism about the existing vaccines' effectiveness against Omicron.
The decisive blow was Fed Chair Jerome Powell's congressional testimony. Although Powell mentioned the day before that uncertainties about the U.S. economy and inflation had increased due to Omicron, on this day he withdrew his stance that inflation was temporary and said it was appropriate to discuss early tapering.
Powell said, "At this point, the economy is very strong and inflationary pressures have increased," adding, "Therefore, in my view, it is probably appropriate to finish the tapering announced in November a few months earlier."
Powell also assessed that "the risk of inflation spreading much more broadly and persisting has increased."
He said that while inflation is expected to ease considerably next year as supply and demand imbalances are resolved, he would not use the term 'transitory' to describe inflation.
Since early completion of tapering could accelerate interest rate hikes, the U.S. stock market immediately widened its losses. The Dow index showed an intraday drop close to 600 points. Although the U.S. 10-year Treasury yield fell again, the Nasdaq index also plunged alongside.
On that day, the 10-year Treasury yield dropped to 1.41% reflecting Omicron concerns but narrowed its decline after Powell's remarks, settling in the 1.45% range. The 2-year Treasury yield, sensitive to monetary policy, surged to 0.559%. The 2-year yield had entered the 0.4% range the day before but rose reflecting expectations of rate hikes.
The Chicago Mercantile Exchange FedWatch tool anticipates two rate hikes next year. The probability of a rate hike in June is 68.4%, and in September, 86.3%.
Michael Feroli, an economist at JPMorgan Chase, forecasted, "If the Omicron variant does not cause serious health problems, the Fed will accelerate tapering."
The divergence between the 10-year and 2-year yields reflects increased chances of short-term rate hikes but a negative long-term economic outlook.
As the 10-year yield fell, the dollar's value also declined. The dollar index dropped 0.43% to 95.925. This deepened the recent decline of the dollar, which had been strong reflecting expectations of U.S. rate hikes.
In the foreign exchange market, a safe-haven preference emerged, strengthening the yen and euro. The Wall Street Journal reported that the dollar's weakness was prominent, revitalizing yen carry trades.
Most stocks fell, but Apple stood out with a 3.1% rise. Analysts attributed Apple's stock increase to its stable cash flow base and solid demand, evaluating it as a safe asset.
Tesla rose 0.68%, maintaining the 'Eleven Hundred Tesla' level, despite CEO Elon Musk raising concerns about SpaceX's bankruptcy.
Facebook plunged 4% after news broke that its cryptocurrency executive resigned.
Vaccine stocks showed mixed results. Pfizer's stock rose 2.5%, but Moderna and BioNTech fell 4.3% and 2.9%, respectively.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
![Clutching a Stolen Dior Bag, Saying "I Hate Being Poor but Real"... The Grotesque Con of a "Human Knockoff" [Slate]](https://cwcontent.asiae.co.kr/asiaresize/183/2026021902243444107_1771435474.jpg)
