[New York Stock Market] Decline Across the Board Amid Inflation and Growth Concerns... S&P 500 Nears Bear Market Territory

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York stock market closed slightly lower on the 19th (local time) as concerns persisted that inflationary pressures could slow down the economy. The S&P 500 index, centered on large-cap stocks, moved even closer to a bear market, down about 20% from its peak. As risk aversion increased, Treasury yields fell.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 31,253.13, down 236.94 points (0.75%) from the previous session. The large-cap focused S&P 500 index fell 22.89 points (0.58%) to 3,900.79, and the tech-heavy Nasdaq index dropped 29.66 points (0.26%) to close at 11,388.50.

Investors continued to focus on inflation and economic slowdown concerns confirmed by the poor earnings of U.S. retail giants such as Walmart and Target. With inflation at its highest level in over 40 years, there is an assessment that corporate difficulties have become more pronounced, and analyses suggest that the Federal Reserve's (Fed) actions could further harm growth.

By individual stocks, Cisco closed down 13.73% from the previous session after quarterly sales fell far short of market expectations. The company also warned that next quarter’s earnings would likely be disappointing.

Some tech stocks such as Nvidia (+1.10%) and Amazon (+0.19%) rebounded. Semiconductor automatic design software company Synopsys rose 10.25% after reporting strong earnings. Cloud company Datadog’s stock also jumped 9.60%. Apple fell 2.46%.

Desmond Lawrence, Chief Investment Strategist at State Street Global Advisors, said, "What’s important here is how earnings hold up," adding, "We are in a very uncertain period and expect greater volatility."

The S&P 500 index, which has recorded seven consecutive weeks of decline, is close to a bear market. The Wall Street Journal reported that the last time it entered a bear market was right after the pandemic in March 2020.

Some experts present a pessimistic view that growth could slow and the stock market could plunge sharply due to the Fed’s monetary tightening.

Deutsche Bank has revised its forecast downward, suggesting the S&P 500 index could fall to the 3,000 level. It projects that during a recession, the stock market decline could approach 40%. Earlier, Goldman Sachs also estimated a 35% chance of a recession in the next two years, stating that further stock market declines would be inevitable in that case.

Esther George, President of the Kansas City Federal Reserve Bank, emphasized in an interview with CNBC that "we need to raise interest rates further." She evaluated the recent stock market adjustment as "one of the paths that appear during the tightening process," adding, "It is not specifically aimed at the stock market."

The economic indicators released on this day were weak. According to the U.S. Department of Labor, the number of initial jobless claims last week rose by 21,000 to 218,000, far exceeding market expectations. The Philadelphia Fed Index, which shows manufacturing activity in the region covered by the Philadelphia Federal Reserve Bank, plunged to 2.6 in May from 17.6 the previous month.

Safe-haven U.S. Treasury prices rose. In the New York bond market, the 10-year Treasury yield fell to 2.85%. A decline in Treasury yields means a rise in Treasury prices. The 10-year yield, which surpassed 3% earlier this month, even touched the 2.77% range during the session. Gold futures rose to $1,840 per ounce.

Oil prices rose on news that Shanghai, China, further eased COVID-19 restrictions. On the New York Mercantile Exchange, June West Texas Intermediate (WTI) crude oil prices closed at $112.21 per barrel, up $2.62 (2.39%) from the previous day.