New York Stock Market Falls on Tech Sector Weakness... Inflation Concerns Highlighted Amid UK Interest Rate Hike

[Photo by AP Yonhap News]

[Asia Economy Reporter Park Byung-hee] The New York stock market closed lower on the 16th (local time) due to weakness in technology stocks. Apple and Tesla Motors shares plunged 4% and 5% respectively, dragging down the market. The Nasdaq index fell sharply due to the weakness in tech stocks, while the Dow and S&P 500 indices saw relatively smaller declines.

The Dow Jones Industrial Average closed at 35,897.64, down 0.08% from the previous trading day. The S&P 500 index fell 0.87% to 4,668.67. The tech-heavy Nasdaq index plunged 2.47% to 15,180.43.

Investors who had been relieved by the results of the U.S. Federal Reserve's (Fed) monetary policy meeting the previous day were surprised by the Bank of England's (BOE) decision to raise its benchmark interest rate, leading them to realize profits.

The day before, the Fed doubled the scale of tapering (asset purchase reduction) and signaled three interest rate hikes next year, strengthening its tightening stance. However, the market reacted with relief, as the Fed's monetary policy was decided at the expected level, sparking a relief rally.

On the other hand, the BOE's interest rate hike on this day was seen as somewhat unexpected. Although there had been forecasts that the BOE might raise rates due to the surge in the UK's November consumer price inflation to 5.1%, the prevailing sentiment leaned toward a rate hold. This was because the Omicron variant had become dominant in the UK, causing a sharp increase in new COVID-19 cases. The UK government declared a state of emergency over the past weekend, and France announced a ban on travelers arriving from the UK on this day.

Nevertheless, the BOE raised its benchmark interest rate from 0.1% to 0.25%, warning of additional inflation risks. The somewhat unexpected rate hike by the BOE fueled speculation that central banks' inflation concerns are more serious than anticipated, causing the New York stock market to turn bearish.

Unlike the BOE, the European Central Bank (ECB) kept its benchmark interest rate unchanged and announced that its quantitative easing policy will end as originally planned in March next year.

Apple shares fell 3.93%, and Tesla shares dropped 5.03%. Major tech stocks including Microsoft (-2.91%), Amazon (-2.53%), Meta Platforms (-1.98%), and Alphabet (-1.36%) all closed lower.

Adobe Systems plunged 10.24% after issuing earnings forecasts that fell short of Wall Street expectations.

Oracle, which presented its highest profit forecast in over a decade, fell 0.41%, avoiding a sharp decline.