[New York Stock Market] Powell Says "Recession Possible," Market Falls... Nasdaq Down 0.15%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York stock market slightly declined on the 22nd (local time) as Federal Reserve (Fed) Chair Jerome Powell expressed a strong commitment to raising interest rates and acknowledged the possibility of a 'recession.' The rebound buying following last week's excessive sell-off lasted only one day (the 21st). Safe-haven assets such as government bonds and gold prices rose.

At the New York Stock Exchange (NYSE) that day, the Dow Jones Industrial Average closed at 30,483.13, down 47.12 points (0.15%) from the previous session. The large-cap S&P 500 index fell 4.90 points (0.13%) to 3,759.89, and the tech-heavy Nasdaq index dropped 16.22 points (0.15%) to close at 11,053.08.

By sector, energy stocks notably declined after U.S. President Joe Biden urged Congress to legislate a temporary suspension of the fuel tax. Marathon Oil closed down 7.23% from the previous session. Chevron fell 4.35%, ExxonMobil dropped 3.96%, and Phillips 66 declined 5.70%. Schlumberger (-3.35%) and Occidental Petroleum (-3.63%) also recorded declines exceeding 3% each.

Real estate and healthcare stocks rose. Crown Castle increased by 3.77%, and American Tower also jumped 2.09%. Moderna closed up 4.68%.

Investors digested Federal Reserve Chair Jerome Powell's remarks that day, closely watching the Fed's tightening stance and the resulting recession concerns.

Chair Powell appeared before the Senate Banking Committee and stated, "We are committed to bringing inflation back to our 2% target," adding, "We are moving swiftly to achieve this." He strongly pledged to curb inflation and emphasized continuing the current tightening measures "until we see strong evidence that inflation is coming down." The Fed has already signaled a 0.5 or 0.75 percentage point rate hike in July.

However, concerns remain high that the Fed's rapid rate hikes could lead to a recession. Citigroup raised the global recession probability to 50% that day. Goldman Sachs increased the likelihood of a U.S. recession next year from 15% to 30% the previous day. UBS also warned of a hard landing risk the day before. Chair Powell acknowledged, "It is certainly possible, though not our intended outcome."

Robert Shane, Chief Investment Officer at Blank Shine Wealth Management, said, "Inflation remains the biggest risk to financial assets," and "Chair Powell has made his position clear. The Fed will continue raising rates until inflation decreases." He expressed concern, saying, "It is hard to imagine a sustained rally in risk assets," and "tightening conditions will act as a headwind for financial markets."

In the New York bond market, the yield on the U.S. 10-year Treasury note fell to around 3.16%. This was due to increased demand for safe-haven government bonds amid growing recession fears. A decline in bond yields means bond prices rose. Earlier, the 10-year yield had surpassed 3.5% on the 14th due to the possibility of aggressive Fed rate hikes. The safe-haven gold price also rose to $1,839.90 per ounce.

Oil prices declined. This followed President Joe Biden's request for legislation to temporarily suspend the fuel tax as part of inflation response measures. On the New York Mercantile Exchange, August West Texas Intermediate (WTI) crude oil prices closed at $106.19 per barrel, down $3.33 (3.04%) from the previous session. This closing price was the lowest since May 12.