[New York Stock Market] Plunges in One Day Amid Recession Concerns... Dow Falls Below 30,000, Nasdaq Down 4.08%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] The major indices of the U.S. New York stock market sharply fell on the 16th (local time) as concerns spread that the economy could fall into a recession due to the Federal Reserve's (Fed) aggressive tightening. The Dow Jones Industrial Average, composed of blue-chip stocks, broke below the 30,000 level, marking its lowest point since January 2021.

On that day at the New York Stock Exchange (NYSE), the Dow closed at 29,927.07, down 741.46 points (2.42%) from the previous session. This was the first time the Dow fell below 30,000 since January 2021. The S&P 500, centered on large-cap stocks, closed at 3,666.77, down 123.22 points (3.25%), and the tech-heavy Nasdaq closed at 10,646.10, down 453.06 points (4.08%). The Nasdaq recorded its lowest level since September 2020.

Investors closely watched the Fed's decision on the giant step (a 0.75 percentage point interest rate hike), subsequent rate hikes by major countries, and the U.S. economic indicators released that day. The Fed strongly signaled its determination to curb inflation by raising interest rates sharply by 0.75 percentage points the day before. However, the relief rally that appeared immediately after was overshadowed by fears of a recession just one day later.

Susan Schmidt of Aviva Investors explained, "Yesterday, the Fed announced the giant step as people expected. They were fighting much higher inflation data than anticipated and raised concerns that inflation was too aggressive," adding, "Now investors remember that the backlash to this is an economic slowdown."

By sector, all major sectors of the S&P 500 showed declines. Economic media CNBC reported that only four stocks in the Dow rose that day. Home Depot (-2.24%), Intel (-3.39%), Walgreens (-2.60%), JP Morgan (-1.72%), 3M (-2.52%), and American Express (-5.96%) all hit new 52-week lows amid growing fears of a recession.

Technology stocks, which had rebounded the previous day, plunged. Tesla closed down 8.54% from the previous session. Amazon (-3.72%), Apple (-3.97%), and Netflix (-3.75%) all fell more than 3%. Semiconductor stocks such as Nvidia (-5.60%) and AMD (-8.12%) also declined. Airline stocks including Delta Air Lines (-7.45%), United Airlines (-8.21%), and Carnival (-11.08%) slid consecutively. Energy stocks such as Schlumberger (-7.32%), Chevron (-5.35%), and ExxonMobil (-3.69%) also showed downward trends.

Market experts conveyed that fears of inflation and slowing growth are pressuring investors. The S&P 500 and Nasdaq are already in bear markets, down approximately 24% and 34% respectively from their previous highs. The Dow is also on the verge of entering a bear market. Especially after the Fed's rate hike the previous day, the Bank of England (BOE) and Swiss National Bank also promptly raised rates, intensifying concerns about economic slowdown due to tightening by major countries.

The economic indicators released that day were also weak. According to the U.S. Department of Commerce, new housing starts in May fell 14.4% from the previous month, marking the lowest level in 13 months. This was below market expectations. New building permits for May also decreased by 7% from the previous month, underperforming market forecasts. Indicators also confirmed a slowdown in manufacturing. According to the Philadelphia Federal Reserve Bank, the Philadelphia Fed manufacturing activity index for June recorded -3.3, indicating contraction. Weekly jobless claims decreased by 3,000 from the previous week to 229,000, but this was not considered a significant change.

In the New York bond market, the yield on the U.S. 10-year Treasury note fell to the 3.24% range. A decline in bond yields indicates a rise in bond prices. The 10-year yield had surpassed 3.48% earlier this week, reaching an 11-year high. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's "fear index," surged more than 11% from the previous session, approaching the 33 level.

The price of gold, a representative safe-haven asset, rose for the second consecutive day. On the New York Mercantile Exchange, August gold futures rose $30.30 (1.7%) from the previous session to $1,849.90 per ounce. Although central banks' rate hikes are generally considered negative for gold prices, the appeal of gold as a safe asset and recent inflation concerns contributed to the price increase.

Oil prices rose due to additional sanctions on Iran announced by the U.S. Treasury and reports of a significant reduction in Libya's oil production. On the New York Mercantile Exchange, July West Texas Intermediate (WTI) crude oil futures closed at $117.58 per barrel, up $2.27 (1.97%) from the previous session. This marked a rebound after three trading days.