[New York Stock Market] New York Stock Market Rises as Oil Prices Fall 7%... Nasdaq Up 1.31%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York stock market showed an upward trend on the 28th (local time) despite concerns over aggressive tightening by the central bank, the Federal Reserve (Fed), influenced by a sharp drop in oil prices. During the session, some short- and long-term U.S. Treasury yields inverted, raising recession warning signals, but buying continued mainly in tech stocks.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,955.89, up 94.65 points (0.27%) from the previous session. The large-cap S&P 500 index rose 32.46 points (0.71%) to 4,575.52, and the tech-heavy Nasdaq index closed at 14,354.90, up 185.60 points (1.31%).

Investors focused on movements in Treasury yields, Fed tightening concerns, the decline in oil prices, risks related to Ukraine, and China’s lockdown measures.

International oil prices plunged more than 7% following news of a rotational lockdown in Shanghai, China’s financial and trade hub, leading to weakness in energy stocks. Chevron, a representative energy stock, closed down 1.75%, ExxonMobil fell 2.81%. Marathon Oil dropped 2.88%, and Schlumberger slid 4.46%. Bank stocks such as JPMorgan (-0.74%), Wells Fargo (-1.43%), and Goldman Sachs (-0.65%) also weakened.

Tech stocks showed strength. Tesla’s stock price surged more than 8% on news that it is pushing for a stock split, leading the market. Amazon rose 2.56%, Zoom Video increased 3.09%, and Microsoft (MS) jumped more than 2%. Apple (0.50%) briefly dipped during the session after news that it would reduce iPhone SE production by about 20% from the original plan next quarter, but turned upward in the afternoon.

In the bond market on this day, the 5-year Treasury yield surpassed the 30-year Treasury yield, causing a yield curve inversion for the first time since 2006. Typically, yield curve inversion is interpreted as a precursor to recession. However, the 5-year to 30-year inversion normalized shortly afterward. Also, the spread between the 2-year and 10-year Treasury yields, which traders consider more important, remains positive.

CNBC reported, "Investors are selling short-term Treasuries and buying long-term Treasuries, showing concerns about the economy," but added, "The 2-year and 10-year yields have not inverted yet." This is interpreted as a sell-off mainly in short-term bonds amid expectations that the Fed will pursue aggressive rate hikes to curb inflation.

Investors continue to closely watch the Fed’s moves. Following Fed Chair Jerome Powell’s hawkish remarks, Wall Street firms such as Goldman Sachs are weighing a big step of raising rates by 0.5 percentage points at once. The March employment report from the Labor Department, to be released later this week, is also a key indicator. The market expects the March employment figures to have slowed compared to previous months.

Geopolitical risks surrounding Ukraine persist. Peace negotiations between Russia and Ukraine have yet to find a breakthrough, and investors are focusing on the 5th round of talks scheduled for the 29th in Istanbul, Turkey. This negotiation will be the first face-to-face meeting since the 10th.

Edward Moya, senior analyst at OANDA, said, "Geopolitical risks are very high," adding, "The U.S. economy is still in good shape, but considering how hawkish the Fed has become, most traders will not rush to buy the dips every time stock prices fall going forward."

International oil prices fell sharply on news that Shanghai entered a rotational lockdown to contain COVID-19. On the New York Mercantile Exchange, May West Texas Intermediate (WTI) crude oil closed at $105.96 per barrel, down $7.94 (7%) from the previous session. This is the lowest closing price since March 18. The lockdown news from China is interpreted as increasing concerns over global economic slowdown and oil demand.