[New York Stock Market] Shaken by Recession Fears, Nasdaq Up 1.75%... International Oil Prices Plunge

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] The major indices of the U.S. New York stock market closed mixed on the 5th (local time), the first trading day after the Independence Day holiday, following a rollercoaster session. Concerns over an economic recession intensified, causing a temporary inversion between short- and long-term U.S. Treasury yields during the session, while international oil prices plummeted.

At the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average closed at 30,967.82, down 129.44 points (0.42%) from the previous session. The large-cap focused S&P 500 index rose 6.06 points (0.16%) to 3,831.39, and the tech-heavy Nasdaq index gained 194.39 points (1.75%) to close at 11,322.24.

By individual stocks, recession fears spread from early in the session, leading to weakness in stocks related to economic growth. Caterpillar fell 2.54% from the previous close. Deere & Co also dropped 3.15%, hitting a yearly low. Mining stock Freeport-McMoRan plunged 6.64%.

Energy stocks also slid due to the decline in international oil prices. Schlumberger dropped more than 6%, closing down 6.51%. Chevron fell 2.63%, ExxonMobil declined 3.13%, and Occidental Petroleum closed down 2.20%.

On the other hand, technology stocks, which had sharply declined in the first half of the year, showed strength. Zoom Video Communications jumped 8.52%, rising more than 8%. Despite JP Morgan lowering its target price, Tesla, a representative tech stock, rose 2.55%, nearing the recovery of the 700-dollar level. Netflix rose 3.30%, Nvidia gained 3.04%, and Meta increased 5.10%.

Mohamed El-Erian, Chief Economic Advisor at Allianz, said in an interview with CNBC's Squawk Box, "The market sees that the Federal Reserve (Fed) has no choice but to raise interest rates to induce an economic slowdown and is focusing on pricing in that slowdown." This means that recession concerns are already reflected in prices.

Investors closely watched recession fears and Treasury yield movements from the start of trading on the day.

In the New York bond market, the yield on the U.S. 2-year Treasury briefly surpassed the 10-year Treasury yield (2.789%) at 2.792%. The inversion, where the short-term 2-year yield exceeds the long-term 10-year benchmark yield, is generally considered a precursor to a recession.

Ian Lyngen, Head of U.S. Interest Rate Strategy at BMO, said, "Given that the 10-year Treasury yield is below 3%, the occurrence of this inversion indicates that something significant is happening in investor sentiment that cannot be ignored." He added, "It is not a direct signal that a recession is imminent," but noted that "it aligns with rising recession concerns."

Recent indicators suggesting a slowdown in U.S. economic growth have been released one after another, increasing market fears. The Atlanta Federal Reserve Bank's real-time GDPNow forecast on the 1st projected that the U.S. GDP growth rate for the second quarter would be -2.1% annualized, a larger decline than the -1.0% forecast at the end of last month. If this continues, a 'technical recession,' defined as two consecutive quarters of negative growth, could become a reality following the first quarter.

On the day, Nomura warned that major countries worldwide, including the U.S., Eurozone, U.K., Japan, Korea, Australia, and Canada, could enter a recession within 12 months. Credit Suisse (CS) lowered its year-end target for the S&P 500 index from 4,900 to 4,300, although it stated that the economy has not yet met recession criteria. Investors are awaiting the Federal Reserve's June Federal Open Market Committee (FOMC) minutes to be released this week and the June employment report later in the week.

As fears of a global recession grow, international oil prices also declined. On the day at the New York Mercantile Exchange (NYMEX), August delivery West Texas Intermediate (WTI) crude oil closed at $99.50 per barrel, down 8.2% ($8.93) from the previous session. This is the first time since May 11 ($99.76) that WTI prices fell below the $100 per barrel mark.

At the London ICE Futures Exchange, September Brent crude was trading at $102.51 per barrel at 7:47 p.m. local time, plunging 9.7% ($10.99). Citigroup stated in a report that if a recession occurs, Brent crude could slide to $65 per barrel by the end of this year.

Not only crude oil but also futures prices of major raw materials, including metals and grains, mostly declined on the day. The U.S. dollar surged to its highest level in 20 years, acting as a headwind for commodity prices traded in dollars.

On the day at the New York Commodity Exchange, August delivery gold closed at $1,763.90 per ounce, down 2.1% ($37.60) from the previous session, marking the lowest closing price this year.

The dollar index, which measures the value of the U.S. dollar against six major currencies, surpassed 106, reaching its highest level since November 2002.