[New York Stock Market] Sharp Decline Amid Inflation Shock... Nasdaq Down 3.52%

[Image source=Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices of the U.S. New York stock market plummeted on the 10th (local time) following news that the May consumer price index recorded the largest increase in about 41 years.

On that day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 31,392.79, down 880.00 points (2.73%) from the previous session. The S&P 500, which focuses on large-cap stocks, fell 116.96 points (2.91%) to 3,900.86, and the tech-heavy Nasdaq index closed at 11,340.02, down 414.20 points (3.52%).

This is analyzed as the May U.S. Consumer Price Index (CPI), released before the opening of the New York stock market, surged 8.6% year-over-year?the largest increase since December 1981?rapidly cooling investor sentiment. The indicator, which suggested persistent high inflation, is expected to strengthen the Federal Reserve's (Fed) tightening measures ahead of next week's interest rate decision.

The market confirmed a broad-based decline. CNBC reported that the number of stocks that fell was roughly nine times that of those that rose. Semiconductor leader Nvidia closed down 5.95% from the previous session. Tesla fell 3.12%, Apple dropped 3.86%. Netflix slid more than 5% after investment bank Goldman Sachs recommended selling. Salesforce declined 4.63%, and Amazon fell 5.60%.

Concerns over economic slowdown due to aggressive tightening also weakened financial and cyclical stocks. Wells Fargo dropped more than 6%, Goldman Sachs fell over 5%, and JP Morgan Chase declined more than 4%. Boeing also slipped over 5%.

Lori Calvasina, Chief U.S. Equity Strategist at RBC Capital Markets, said, "Today's inflation data once again confirms the fears investors have been holding." She diagnosed that the May CPI shattered market expectations for easing tightening, causing investor sentiment to freeze rapidly.

According to the U.S. Department of Labor, the May CPI rose 8.6% compared to the same period last year. This is the highest increase since December 1981, surpassing not only the previous month but also March. It also exceeded the Wall Street Journal (WSJ) experts' forecast of 8.3%.

Accordingly, some in the market speculate that the Fed, which has signaled consecutive big steps, might take a giant step by raising interest rates by 0.75 percentage points at once. Michael Pearce, Senior U.S. Economist at Capital Economics, said, "The May inflation data has increased the possibility that the Fed could expand the size of rate hikes over the next few months," adding, "The Federal Open Market Committee (FOMC) could raise rates by 0.75 percentage points this month."

Due to tightening concerns, Treasury yields soared. In the New York bond market, the U.S. 10-year Treasury yield briefly hit 3.178% during the session. The 2-year yield, sensitive to monetary policy, also surpassed 3%, reaching its highest level since 2008.

Economic indicators released that day were also weak. The preliminary University of Michigan Consumer Sentiment Index for June came in at a record low of 50.2, far below market expectations of 58.5. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's 'fear gauge,' jumped more than 6% from the previous session, hovering around the 27 level.

The price of gold, a representative safe-haven asset, rose. On the New York Mercantile Exchange, August gold futures closed at $1,875.50 per ounce, up $22.70 (1.2%) from the previous session.

Oil prices fell. On the New York Mercantile Exchange, July West Texas Intermediate (WTI) crude oil futures closed at $120.67 per barrel, down 84 cents (0.69%) from the previous session. This was due to inflation concerns and worries over China's COVID-19 lockdowns. Although it fell for two consecutive days, prices still remain above the $120 level.