[New York Stock Market] Rally on Sharp Oil Price Drop... Nasdaq Up 2.92% Ahead of US Interest Rate Decision

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices of the U.S. New York stock market closed higher on the 15th (local time) as international oil prices fell below $100 per barrel. Market experts analyzed that the decline in oil prices acted as a catalyst for the 'rally' ahead of the Federal Reserve's interest rate hike decision.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,544.33, up 599.10 points (1.82%) from the previous session. The large-cap S&P 500 index rose 89.34 points (2.14%) to 4,262.45, and the tech-heavy Nasdaq index ended the day at 12,948.62, up 367.40 points (2.92%). The small-cap Russell 2000 index also recorded a gain of 27.25 points (1.40%) to 1,968.97.

Among individual stocks, technology stocks, which had been on a recent downtrend, led the rebound. Microsoft and Netflix jumped nearly 4% after Wall Street recommended increasing their weightings. Tesla rose 4.71% from the previous close, reclaiming the 800 level. Apple (3.0%), Amazon (3.84%), and Meta Platforms (2.88%) also showed upward trends. Nvidia closed up 7.64%, and Advanced Micro Devices' stock price increase approached 7%.

Airline stocks also performed well due to the decline in international oil prices. Delta Air Lines rose 8.56%. United Airlines and American Airlines also gained more than 7%. Other travel-related stocks, including Carnival (5.29%), cruise lines, hotel stocks, and casino stocks, showed strength supported by the drop in oil prices.

However, energy stocks faced downward pressure. ExxonMobil closed down 5.78%, and Chevron fell 5.06%. Occidental Petroleum, Marathon Oil, and Halliburton also dropped at least 2% each.

International oil prices fell below $100 per barrel on this day. West Texas Intermediate (WTI) crude oil for April delivery on the New York Mercantile Exchange (NYMEX) closed at $96.44 per barrel, down 6.4% ($6.57) from the previous session. This marks a decline of more than 20% in just one week compared to the $123 per barrel closing price on the 8th, which was the highest since August 2008.

This decline is interpreted as being due to the resumption of peace talks between Russia and Ukraine, along with lockdown measures in China to curb the spread of COVID-19, raising concerns about reduced demand.

Jack Yanashievich of Natixis Investment Manager Solutions said, "There is a negative correlation where stock markets fall when oil prices rise, and stock markets rise when oil prices fall." Sam Stovall, Chief Investment Strategist at CFRA, commented, "The market was tired of the prolonged decline in stock prices, so this led to a rebound. Even if it is just a relief rally, it was about time."

Investors are closely watching the fourth round of negotiations between Russia and Ukraine, as well as the Federal Open Market Committee (FOMC) regular meeting held over two days starting today by the Federal Reserve. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) rate futures market reflects more than a 96% chance of a 0.25 percentage point rate hike this month.

Bill Diviny, Senior Economist at ABN AMRO, told MarketWatch, "While rising commodity prices could hurt growth, this war has strengthened rather than weakened the rationale for interest rate hikes."

The U.S. Producer Price Index (PPI) for February, released on this day, rose more than 10% year-on-year, reaching a record high. The impact of soaring commodity prices, including oil, due to Russia's invasion of Ukraine is expected to be fully reflected starting with the March PPI, suggesting inflationary pressures will increase further. However, the month-on-month figure was below both the previous month and expectations, leading to some relief in the market.

The March manufacturing activity in New York State, also released on the same day, sharply slowed to levels seen at the early stages of the COVID-19 pandemic. The Empire State Manufacturing Index, published by the Federal Reserve Bank of New York, recorded -11.8 in March, far below the expert forecast of 5.5.

The risk of Russian default is also considered a key variable that investors are watching. Russia must pay interest of $117 million (approximately 145 billion KRW) on dollar-denominated bonds. However, even if it fails to pay immediately, there is a 30-day grace period, so an official default declaration is not expected soon.

David Donabedian, Chief Investment Officer at CIBC Private Wealth, said, "Investors are concerned that the Ukraine invasion is fueling inflation that was already a worry and is becoming a negative factor for economic growth prospects. It is a one-two punch in terms of increasing uncertainty."

Gold, a representative safe-haven asset, showed a decline on this day. April delivery gold on the New York Mercantile Exchange closed at $1,929.70 per ounce, down 1.6% ($31.10).