[New York Stock Market] Nasdaq Drops 2.28% Amid FOMC Watch and Market Volatility

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] The three major indices of the U.S. New York stock market all closed lower on the 25th (local time) after a rollercoaster session. After a dramatic rebound the previous day that showed an upward trend for the first time in a while, the New York stock market fluctuated sharply again on this day but lost momentum in the latter part, failing once again to create another dramatic turnaround.

On this day, the Dow Jones Industrial Average, composed of blue-chip stocks in the New York market, closed at 34,297.73, down 66.77 points (0.19%) from the previous session. The S&P 500 index fell 53.68 points (1.22%) to 4,356.45, and the Nasdaq index closed at 13,539.29, down 315.83 points (2.28%). Adam Crisafulli, founder of research firm Vital Knowledge, said, "The rollercoaster atmosphere continues," but added, "The intraday low from the previous day was not broken," describing the mood.

The market, ahead of the Federal Reserve's Federal Open Market Committee (FOMC) meeting, started the day with a downward trend. The tech-heavy Nasdaq index dropped more than 3% during the morning session. However, in the afternoon, bargain hunting became prominent, and the decline began to narrow, reminiscent of the dramatic rebound from the previous day. Yet, about ten minutes before the closing bell, the major indices' losses widened again.

By individual stocks, tech stocks sensitive to interest rates showed declines again on this day. Tesla (-1.25%), Nvidia (-4.48%), Apple (-1.14%), Microsoft (MS, -2.66%), Netflix (-5.35%), and Meta (-2.77%) all retreated together. The Nasdaq index is already in a technical correction phase, having fallen more than 15% from its peak.

On the other hand, banks and energy stocks, which have high expectations for economic recovery and earnings, performed well. Bank of America (BoA) rose 1.5%, Citigroup increased 2.1%, and American Express surged 8.92%. Occidental Petroleum, APA, and Halliburton stocks also jumped more than 7%. IBM and Johnson & Johnson closed up 5.65% and 2.86%, respectively, after releasing quarterly earnings.

The 10-year U.S. Treasury yield rose to 1.78% on this day. The volatility index (VIX), known as Wall Street's fear gauge, exceeded 35 during the session but fell back to around 31.

Manish Deshpande of Barclays warned in an investor memo on this day, "The downside risks from monetary tightening have increased," adding, "So far, the pain has been localized to high-valuation stocks, but signals of broader risk aversion are emerging." Liz Young, head of investment strategy at SoFi, expressed concern about uncertainty, saying, "We are currently in the process of digesting a new environment that we have not adapted to."

Investors are focusing on hints about the timing and magnitude of the interest rate hike that Fed Chair Jerome Powell will announce at the FOMC meeting starting this day. Powell is expected to signal at a press conference on the afternoon of the 26th that the first rate hike will occur in March.

Additionally, investors are closely watching the impact of the Ukraine crisis on the global economy. U.S. President Joe Biden warned on this day that if Russia invades Ukraine, he might impose direct sanctions on Russian President Vladimir Putin. He also mentioned that some of the 8,500 U.S. troops could be relocated in the near future.

U.S. economic indicators were weak on this day. The January Consumer Confidence Index fell to 113.8 from the previous day. The Richmond Federal Reserve Bank's January Manufacturing Index dropped to 8 from 16 in the previous month, although this still exceeded market expectations.

Meanwhile, news that the International Monetary Fund (IMF) lowered its global economic growth forecast for this year by 4.4% negatively affected the market. This is 0.5 percentage points lower than the forecast made in October last year. The U.S. growth forecast also fell by 1.2 percentage points to 4.0%.

International oil prices rose. On this day, the March West Texas Intermediate (WTI) crude oil price on the New York Mercantile Exchange closed at $85.60 per barrel, up $2.29 (2.75%) from the previous session. After hitting a seven-year high earlier, oil prices had stalled but rebounded again after four trading days. This was due to geopolitical risks such as the Russia-Ukraine conflict and concerns over production disruptions.

The price of gold, a representative safe-haven asset, also rose. It was trading at $1,848.00 per ounce, up 0.34% from the previous trading day.