[New York Stock Market] S&P 500 Drops 20% This Year... Worst First Half in 52 Years

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] The major indices of the U.S. New York stock market closed lower on the 30th (local time), marking the end of trading for the first half of 2022. The S&P 500 index plunged more than 20% this year amid fears of recession and inflation, recording the worst first half since 1970.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 253.88 points (0.82%) from the previous close to finish at 30,775.43. The large-cap focused S&P 500 index dropped 33.45 points (0.88%) to 3,785.38, while the tech-heavy Nasdaq index closed down 149.16 points (1.33%) at 11,028.74.

By individual stocks, cruise shares such as Carnival (-2.48%) and Royal Caribbean (-3.08%) continued their decline from the previous day. Home-related retail stocks were also weak. Furniture chain RH plunged more than 10% after issuing a profit warning. Wayfair and Williams Sonoma also fell 9.57% and 4.44%, respectively. Walgreens dropped more than 7%, marking the largest decline in the Dow. Leading tech stock Tesla fell 1.76%. Apple (-1.80%), Netflix (-1.96%), Nvidia (-2.46%), and Meta (-1.64%) also closed lower across the board.

Investors closely watched the economic indicators and Treasury yield movements released on this day.

The core Personal Consumption Expenditures (PCE) price index, favored by the U.S. Federal Reserve (Fed) as an inflation gauge, remained at a high level. According to the U.S. Department of Commerce, the May PCE price index rose 6.3% year-over-year and 0.6% month-over-month. Excluding volatile food and energy, the May core PCE increased 4.7% year-over-year.

The Fed has signaled a 0.5 or 0.75 percentage point rate hike at the upcoming FOMC meeting next month. Fed Chair Jerome Powell indicated at a forum the day before that "the bigger mistake would be failing to restore price stability," suggesting a willingness to accept some economic slowdown risks during the tightening process.

With ongoing recession concerns, the U.S. 10-year Treasury yield fell to around 3.02% in the New York bond market. The decline in yields points to a rise in prices of safe-haven government bonds. On this day, Deutsche Bank released a survey showing that about 90% of investors expect the U.S. to enter a recession before the end of 2023. More than 70% of respondents predicted the S&P 500 index would fall to 3,300.

This day marked the last trading day of the second quarter and the first half of the year. Due to inflation and recession fears spreading since the beginning of the year, the S&P 500 index, reflecting the stock prices of the top 500 U.S. companies, recorded the worst first half since 1970, with a decline exceeding 20%. According to The New York Times (NYT), except for energy companies benefiting from the sharp rise in oil prices following the Ukraine war, stock prices of companies in all other sectors fell. During the same period, the Dow fell 15%, and the Nasdaq dropped more than 29%.

Especially, the Nasdaq index, composed mainly of tech stocks hit hard by rate hikes, is currently more than 31% below the high recorded in November last year. Netflix has plunged more than 70% this year. Apple and Alphabet also showed declines in the 20% range.

New York market experts expect that until clear signs of easing inflation emerge, concerns over tightening will persist, and stock prices will struggle to gain momentum.

Steve Sosnick, Chief Strategist at Interactive Brokers, said, "Stocks need to hit bottom to rebound, but it is not clear if the bottom has been reached." Concerns about recession due to the Fed's aggressive tightening are also mounting. George Ball, Chairman of Sanders Morris Harris, said, "The market has not yet bottomed. We will see further declines," predicting the S&P 500 could fall to around 3,100.

Oil prices fell. On the New York Mercantile Exchange, August West Texas Intermediate (WTI) crude oil closed at $105.76 per barrel, down $4.02 (3.7%) from the previous session. On this day, the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC major oil producers, known as OPEC Plus (OPEC+), decided to maintain the August production increase at the previously planned 648,000 barrels per day. OPEC+’s next regular meeting is scheduled for August 3.