[New York Stock Market] Mixed Close on Late Bargain Buying, Nasdaq Down 0.26%... Dollar Ultra-Strong

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York Stock Exchange closed mixed on September 1, the first trading day of September (local time). Following last week's 'hawkish' Jackson Hole speech by Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), risk-averse sentiment increased, while a rebound buying was also observed after several days of sharp declines. The U.S. dollar, a representative safe-haven asset, showed extreme strength.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average, composed of blue-chip stocks, rose 145.99 points (0.46%) from the previous close to 31,656.42, and the large-cap focused S&P 500 index closed up 11.85 points (0.30%) at 3,966.85. Meanwhile, the tech-heavy Nasdaq index ended the session down 31.08 points (0.26%) at 11,785.13.

The New York stock market started the day lower amid ongoing concerns about tightening. The Nasdaq recorded its first five-day losing streak since February. However, the Dow and S&P 500 rallied in the afternoon session, avoiding a five-day consecutive decline.

By individual stocks, semiconductor leaders Nvidia and AMD plunged 7.67% and 2.99%, respectively, after receiving notification from the Joe Biden administration to halt exports of cutting-edge AI semiconductors to China. Qualcomm fell 1.78%, and Intel dropped 0.50%. Cybersecurity software company Okta fell nearly 34% despite beating market expectations, as some investment banks lowered their price targets.

Energy stocks underperformed due to falling oil prices. Valero dropped 5.53%. Occidental Petroleum (-3.66%), ExxonMobil (-1.80%), Chevron (-1.59%), and Halliburton (-3.95%) also closed lower. Bed Bath & Beyond, which slid double digits despite announcing restructuring measures the previous day, fell another 8.60%. On the other hand, despite the overall tech sector weakness, major information and communication companies saw buying demand at lower prices and posted gains. Meta rose 1.49%, Netflix increased 2.90%. Tesla (+0.56%), Apple (+0.47%), and Alphabet (+1.40%) also showed upward trends.

Investors awaited the employment report to be released on September 2, closely monitoring the Fed's monetary tightening path, Treasury yields, exchange rates, and economic indicators. Given that September is typically not a high-return month for the New York stock market, overall investor sentiment was considered subdued.

On this day, Treasury yields surged in the New York bond market, negatively impacting stock prices. The 2-year yield, sensitive to monetary policy, briefly hit 3.516% during the session, marking the highest level since November 2007. This was particularly negative for growth and tech stocks. The long-term benchmark 10-year yield also rose to around 3.29% intraday before slightly easing to 3.257%. The inversion of the yield curve, where long-term yields fall below short-term yields, continued. This is generally regarded as a precursor to an economic recession.

The U.S. dollar showed strength. The Dollar Index, which reflects the value of the dollar against six major currencies, rose 0.9% to 109.68, the highest since June 2002. The euro slipped below parity again, trading at $0.9943 per euro. The British pound traded at $1.1522, its lowest in two and a half years. The Japanese yen stood at 140.225 yen per dollar, marking its lowest value since 1998. Generali Insurance Asset Management assessed that "due to global economic slowdown, especially Europe's energy crisis, there is room for further U.S. dollar strength."

The economic indicators released on this day were generally positive. Weekly initial jobless claims in the U.S. fell to 232,000, the lowest in two months, continuing a three-week decline. The August layoff figures compiled by Challenger, Gray & Christmas (CG&C) showed a 21% decrease from the previous month. This suggests that despite ongoing monetary tightening and heightened recession warnings, the U.S. labor market remains resilient. The S&P Global U.S. Manufacturing Purchasing Managers' Index (PMI) for August recorded 51.5. Although lower than the previous month, it remained above the baseline of 50, indicating expansion. The Institute for Supply Management (ISM) August Manufacturing PMI was 52.8.

However, these economic indicators have reinforced expectations that the Fed will continue high-intensity tightening, which has negatively affected the stock market. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) futures market reflects a 74% probability that the Fed will raise rates by 0.75 percentage points in September.

Market experts suggest that after digesting the hawkish remarks from Fed officials following Powell's Jackson Hole speech, the market may break the June lows this month. Henry Allen, strategist at Deutsche Bank, said, "Investors are pricing in more rate hikes over the coming months, causing risk assets to lose momentum." John Lynch, Chief Investment Officer at Comerica Wealth Management, stated, "Investors have finally recognized the Fed's strong commitment to its (price stability) goals."

Oil prices fell for the third consecutive trading day. On the New York Mercantile Exchange, October West Texas Intermediate (WTI) crude oil closed at $86.61 per barrel, down $2.94 (3.3%) from the previous close. This is attributed to news of renewed COVID-19 lockdowns in Chinese cities.