[New York Stock Market] Broad Decline Amid Economic Slowdown Warnings... 10-Year Bond Yield Surpasses 3% Again

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York Stock Exchange closed lower on the 8th (local time) amid concerns over an economic slowdown. Ahead of this week's inflation data release, the 10-year Treasury yield surpassed the 3% mark again in the bond market, and crude oil prices exceeded $120 per barrel.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 32,910.90, down 269.24 points (0.81%) from the previous session. The S&P 500, focused on large-cap stocks, fell 44.91 points (1.08%) to 4,115.77, while the tech-heavy Nasdaq dropped 88.96 points (0.73%) to close at 12,086.27.

Investors monitored warnings of economic slowdown from the World Bank (WB) and the Organisation for Economic Co-operation and Development (OECD), along with the resulting rise in Treasury yields and crude oil prices. With the U.S. Consumer Price Index (CPI) data due on the 10th, crude oil prices surpassing $120 per barrel have sustained inflation concerns.

Intel closed down 5.28% after its management indicated weakening semiconductor demand. Nvidia (-1.45%), AMD (-3.21%), and Micron (-3.05%) also slid. Credit Suisse fell more than 1% after warning of poor earnings due to monetary tightening and the impact of the Ukraine war.

Campbell Soup rose 1.52% after reporting stronger-than-expected earnings. Novavax surged 5.41% on news that the U.S. Food and Drug Administration (FDA) advisory panel recommended emergency use authorization for its COVID-19 vaccine. Moderna gained 2.19% after confirming that its new booster shot provides stronger immunity against Omicron compared to existing vaccines.

Supported by rising oil prices, some energy stocks also performed well. ExxonMobil closed up 1.18%. Schlumberger (+1.31%) and Chevron (+0.52%) also saw gains. However, Occidental Petroleum dropped more than 2%.

Leading tech stock Tesla rose 1.25%. Microsoft, which plans to significantly scale back operations in Russia, fell 0.77%.

Following the WB, the OECD also downgraded its global growth forecast for this year, intensifying stagflation warnings amid low growth and soaring inflation. The WB lowered its global economic growth forecast for this year from 4.1% to 2.9% the previous day. The OECD also cut its forecast from 4.5% to 3.0%, a 1.5 percentage point reduction. Notably, both the WB and OECD have lowered the U.S. growth forecast to the 2% range for this year.

Earlier, Deutsche Bank’s Chief Economist Matthew Luzzetti, who warned of a possible recession in 2023, cautioned that the likelihood of a recession will increase over the coming months. Mohamed El-Erian, Chief Economic Advisor at Allianz, also appeared on CNBC’s Squawk Box, stating that the Federal Reserve’s tightening could heighten concerns about economic growth and corporate earnings, potentially delivering a direct blow to the stock market.

On the same day in the New York bond market, the U.S. 10-year Treasury yield surpassed the 3% level again, interpreted as a reflection of persistent inflation concerns. Crude oil prices also exceeded $120 per barrel. At the New York Mercantile Exchange, July West Texas Intermediate (WTI) crude oil prices closed at $122.11 per barrel, up $2.70 (2.26%) from the previous session. This marks the second-highest level this year. The price increase is attributed to supply concerns and confirmed declines in U.S. gasoline inventories.

Investors are awaiting the U.S. May CPI report this week. If high inflation is confirmed to persist, the Fed’s tightening measures are expected to accelerate. The European Central Bank (ECB) will also hold a monetary policy meeting this week. Steven Ines, Managing Partner at SPI Asset Management, said, "Tightening financial conditions is a clear way to reduce inflation, but it also lowers asset prices."