[New York Stock Market] Investor Sentiment Revived by Sharp Oil Price Drop... Nasdaq Rises 3.59%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] As oil prices declined and risk appetite revived, major indices on the U.S. New York stock market rallied in unison on the 9th (local time). With international oil prices, which had soared since Russia's invasion of Ukraine, plunging more than 10%, the S&P 500 index, centered on large-cap stocks, recorded its largest daily gain since June 2020, and the Nasdaq index, focused on tech stocks, posted its biggest daily increase since November 2020.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,286.25, up 653.61 points (2.0%) from the previous session. The S&P 500 index ended at 4,277.88, up 107.18 points (2.57%), and the Nasdaq index closed at 13,255.55, rising 460.00 points (3.59%). The Russell 2000 index, composed of small-cap stocks, rose 53.27 points (2.71%) to 2,016.29.

The market focused on the decline in commodity prices, including oil. The international oil price benchmark, which had surpassed $130 per barrel earlier this week, plunged double digits on this day, reviving investor sentiment. Along with oil, prices of representative safe-haven assets such as gold (-2.27%), silver (-3.23%), copper (-2.56%), and platinum (-4.59%) also fell in tandem. Cassie Bostanich, Chief U.S. Economist at Oxford Economics, commented, "The stock market continues to take cues from commodity prices, mainly oil price changes," reflecting the market atmosphere.

By sector, tech stocks led the rally. Netflix and Microsoft rose around 5% and 4%, respectively, driving the overall market. Tesla closed up 3.87%, and Apple rose 3.28%. Nvidia jumped nearly 7%. Alphabet A (Google, 4.87%) and Meta Platforms (4.29%) also recorded gains.

Essential consumer goods stocks, which had been hit hard by inflation concerns, rebounded on this day. Nike and Starbucks each rose more than 4%. Airline stocks such as United Airlines (7.2%), Delta Air Lines (5.00%), and Carnival (8.44%), as well as cruise stocks, showed strength.

Major bank stocks including Bank of America (6.83%), JP Morgan Chase (4.47%), Wells Fargo (5.81%), Goldman Sachs (3.80%), and PNC Financial (2.84%) all closed higher. Bumble surged more than 40% immediately after releasing earnings that exceeded Wall Street expectations.

On the other hand, energy stocks such as ExxonMobil (-5.79%) and Marathon Oil (-2.86%), which had been supported by rising oil prices, showed weakness on this day.

Market experts analyzed that with the decline in commodity prices including oil, the market has entered a pause phase, but significant volatility is expected to continue for some time. Chief Economist Bostanich said, "(The stock market) will continue to maintain volatility," adding, "When prices fall, rallies occur." Viraj Patel, Global Macro Strategist at Vanda Research, also said, "It seems like a slight pause," but added, "Many investors do not believe the worst is over."

In the bond market, the yield on the U.S. 10-year Treasury rose to around 1.94%. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's 'fear index,' fell more than 7% from the previous session to the 32 level.

Since Russia's invasion of Ukraine does not appear to be resolved in the short term, there are ongoing analyses that upward pressure on commodity prices including oil remains significant. This inevitably poses a burden on future stock market outlooks. The possibility of a 'dead cat bounce,' where asset prices temporarily rise during a downtrend, is also mentioned.

Ross Mayfield, Investment Strategy Analyst at Baird, said, "Overall, volatility will persist," emphasizing attention to the Federal Reserve's tightening moves ahead. The Fed will hold its regular Federal Open Market Committee (FOMC) meeting on June 15-16 to decide monetary policy. Also, prior to this, the key inflation indicator, the February Consumer Price Index (CPI), is scheduled to be released on the morning of the 10th.

On this day at the New York Mercantile Exchange, April West Texas Intermediate (WTI) crude oil prices closed at $108.70 per barrel, plunging $15 (12.1%) from the previous session. This is the largest daily drop since November 26. Brent crude also soared to $139 per barrel earlier this week, the highest since 2008, but fell sharply by 13% on this day to the $110 range.

This decline in oil prices is interpreted as a result of growing expectations for increased production by oil-producing countries. The United Arab Emirates (UAE) announced it would request OPEC Plus (+) oil-producing countries to increase production more rapidly. Iraq also stated it could increase production if requested by OPEC+ oil-producing countries.

In the cryptocurrency market, Bitcoin jumped nearly 10% from the previous day's closing price, trading around $42,000. President Joe Biden signed an executive order directing federal government research on cryptocurrencies on this day.