[New York Stock Market] Inflation and Tightening Fears Ahead of CPI Announcement... Nasdaq Down 2.75%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joesulgina] Major indices on the U.S. New York stock market closed lower on the 9th (local time) ahead of the release of inflation data that will gauge the Federal Reserve's (Fed) tightening stance. The European Central Bank's (ECB) announcement of policy rate hikes in July and September further heightened global tightening concerns, dampening investor sentiment.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 638.11 points (1.94%) from the previous close to finish at 32,272.79. The large-cap S&P 500 index dropped 97.95 points (2.38%) to 4,017.82, while the tech-heavy Nasdaq index declined 332.04 points (2.75%) to 11,754.23. The small-cap Russell 2000 index also closed down 40.15 points (2.12%) at 1,850.86.

Among individual stocks, major tech companies sensitive to interest rates showed weakness. Meta Platforms closed down 6.43% from the previous session. Amazon fell 4.15%, Tesla 0.89%, and Microsoft 2.08%. Apple and Nvidia also slipped more than 3%. Boeing dropped 4.23%, marking the worst performance on the Dow index.

Casino stocks also showed notable declines. Las Vegas Sands fell 5.62%, and Caesars Entertainment dropped 3.82%. Pinduoduo, a China-based e-commerce platform listed in the U.S., slid nearly 10%.

Investors are awaiting the U.S. May Consumer Price Index (CPI) scheduled for release the next day. This data is expected to indicate whether inflation has peaked or if the Fed will take a more aggressive stance to curb inflation. According to a Wall Street Journal survey, economists estimate that the May CPI rose 8.3% year-over-year, the same level as the previous month.

The market also closely watched the ECB's rate hike announcement and movements in government bond yields. The ECB previously announced it would raise rates for the first time in 11 years, planning to end its asset purchase program on July 1 and raise rates in July and September. Following the ECB's announcement, major countries' government bond yields surged. In the New York bond market, the U.S. 10-year Treasury yield spiked to 3.073% before easing off.

Leo Grohovski, Chief Investment Officer at BNY Mellon Wealth Management, commented, "There is concern that the Fed is tightening in an economy already showing signs of recession." Many investors are reluctant to make large bets until a clearer picture emerges. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's "fear gauge," rose more than 8% from the previous close, hovering around the 26 level.

According to CNBC, a survey of chief financial officers (CFOs) of major U.S. companies showed that 77% expect a recession in the first half of next year. Over 40% of CFOs cited inflation as the biggest external risk. Other major risks mentioned included the Federal Reserve's monetary policy (23%) and the Russia-Ukraine war and supply chain concerns (14%).

The U.S. unemployment data released that day was somewhat disappointing. Initial jobless claims for the previous week increased by 27,000 to 229,000, the highest since January this year and exceeding market expectations.

International oil prices fell amid profit-taking. On the New York Mercantile Exchange, July West Texas Intermediate (WTI) crude oil prices closed down 60 cents (0.49%) at $121.51 per barrel. Although improving economic data from China was positive for oil prices, news that some areas of Shanghai would enter lockdown over the weekend exerted downward pressure.