[New York Stock Market] US Tightening Concerns Lead to 3 Consecutive Days of Decline... Nasdaq Down 1.12%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] The major indices of the U.S. New York stock market fell for the third consecutive trading day on the 30th (local time) amid concerns over the Federal Reserve's (Fed) aggressive tightening policy.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 31,790.87, down 308.12 points (0.96%) from the previous session. The S&P 500, which focuses on large-cap stocks, fell 44.45 points (1.10%) to 3,986.16, and the tech-heavy Nasdaq dropped 134.53 points (1.12%) to close at 11,883.14.

The S&P 500 broke below the 4,000 level for the first time in about a month, falling below the closely watched 50-day moving average. The Dow fell below the 32,000 level, and the Nasdaq dropped below 12,000.

All sectors of the S&P 500 declined. The weakness in technology stocks, which are sensitive to interest rate hikes, was prominent. Tesla closed down 2.50% from the previous session. Meta (-1.26%), Apple (-1.52%), Amazon (-0.82%), Alphabet (-0.44%), and Microsoft (-0.85%) also fell in succession.

Investment bank Citi stated that the semiconductor industry is entering its worst downturn in a decade, leading semiconductor stocks such as Intel (-2.03%), Nvidia (-2.11%), and AMD (-1.75%) to close down around 2%. Citi forecasted that due to recession and inventory effects, the Philadelphia Semiconductor Index (SOX) could hit a new low and fall an additional 25%.

Energy stocks also suffered due to a sharp drop in international oil prices. ExxonMobil fell nearly 4%. Chevron and Occidental Petroleum slid 2.44% and 4.32%, respectively.

Meanwhile, Best Buy, a major electronics retailer, rose 1.61% supported by earnings that exceeded market expectations. Baidu fell more than 6% despite better-than-expected earnings. Twitter's stock dropped 1.80% following news that Tesla CEO Elon Musk resubmitted documents to the U.S. Securities and Exchange Commission (SEC) to terminate the acquisition agreement with Twitter.

Investors closely monitored the aftereffects of Fed Chair Jerome Powell's hawkish remarks last week, paying attention to future tightening moves, Treasury yields, and labor market indicators.

Following Chair Powell, other Fed officials also made hawkish comments. John Williams, President of the New York Federal Reserve Bank, said, "We need to maintain restrictive policy for the time being," adding, "This is not something to do briefly and then change direction." Thomas Barkin, President of the Richmond Fed, also stated in a speech in West Virginia that "We are committed to bringing inflation down to the target range," but predicted that "inflation will not fall as quickly or evenly as expected."

Especially as the labor market data released that day showed solid conditions, market concerns about tightening sharply increased. The U.S. Department of Labor reported that job openings in July reached 11.2 million, an increase of 200,000 from the previous month, far exceeding market expectations. Despite recession fears, the confirmation that many companies still suffer from labor shortages has strengthened expectations for further Fed tightening. Additionally, the Conference Board's consumer confidence index for August came in at 103.2, significantly surpassing market forecasts.

Amid heightened tightening concerns, Treasury yields soared in the New York bond market that day. The 2-year Treasury yield, sensitive to monetary policy, hit 3.497% intraday, the highest in 14 years. The 10-year Treasury yield rose slightly to around 3.11% compared to the previous session. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's "fear gauge," stood at 26.

Stephanie Lang, Chief Investment Officer at HomeRich Berg, said, "The Fed is clearly trying to maintain inflation as the top priority," adding, "This will continue to pressure the market. Volatility will persist through the end of the year." Rod von Lipsey of UBS Private Wealth Management diagnosed, "The summer rally was short-lived." Investors are also awaiting the employment report to be released this Friday.

However, recession concerns continue. Investment bank UBS stated that the probability of a U.S. recession next year has risen to 60%. Steven Roach, a Yale University professor and former chairman of Morgan Stanley Asia, appeared on CNBC Fast Money and predicted that unless a "miracle" occurs, the U.S. will enter a recession. He mentioned that the unemployment rate could rise above 5% to as high as 6%.

Oil prices fell as concerns over production cuts by the Organization of the Petroleum Exporting Countries (OPEC) eased. On the New York Mercantile Exchange, October West Texas Intermediate (WTI) crude oil prices traded at $91.64 per barrel, down $5.37 (5.5%) from the previous session.