[New York Stock Market] Apple Plunge Leads to Broad Decline... Nasdaq Down 2.84%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York Stock Exchange closed lower across the board on the 29th (local time). Rising bond yields weighed on stock prices, and the sharp plunge in Apple’s stock?the largest company by market capitalization?due to an unusual downgrade by Bank of America (BoA) froze overall market investor sentiment. The S&P 500 index hit a new low for the year.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 29,225.61, down 458.13 points (1.54%) from the previous session. The large-cap focused S&P 500 index fell 78.57 points (2.11%) to 3,640.47, and the tech-heavy Nasdaq index dropped 314.13 points (2.84%) to 10,737.51.

All 11 sectors of the S&P 500 recorded losses, with utilities and technology sectors notably weak. Apple’s stock closed down 4.91% from the previous session. Tesla (-6.81%), Amazon (-2.72%), Nvidia (-4.05%), Alphabet (-2.63%), and Meta (-3.67%) also saw significant declines.

Used car dealer CarMax plunged 24.60% after reporting quarterly earnings below market expectations. Bed Bath & Beyond also fell 4.18% following a 28% drop in sales.

Investors continued to monitor the ripple effects of financial market instability originating from the UK, focusing on bond yields and economic indicators released that day.

After the Bank of England (BOE) announced plans to purchase government bonds, bond yields, which had been declining, rallied again, putting pressure on stock prices. In the New York bond market, the yield on the U.S. 10-year Treasury rose to around 3.76%, reaching as high as 3.868% during the session. The 2-year yield, sensitive to monetary policy, also climbed to about 4.18%.

The prevailing view remains that the Federal Reserve’s (Fed) aggressive tightening to curb inflation will continue. Loretta Mester, President of the Cleveland Federal Reserve Bank, emphasized in a CNBC interview the need for further rate hikes, stating, "Rates are not yet at a restrictive level."

Apple was the main factor dragging down overall market sentiment. BoA downgraded Apple’s investment rating to "neutral" and lowered its price target from $185 to $160. Concerns over a global consumption slowdown over the next year are expected to reduce earnings. The recent strong dollar was also cited as a negative factor for Apple’s earnings cycle.

The U.S. real economic growth rate released that day showed a negative (-) 0.6%, confirming two consecutive quarters of negative growth. According to the U.S. Department of Commerce, the GDP growth rate for the second quarter was finalized at an annualized -0.6%. Following a 1.6% contraction in the first quarter, the U.S. economy met the technical recession criteria with two consecutive quarters of negative growth.

However, the Joe Biden administration and many private economists believe the U.S. economy has not yet entered a recession, citing a strong labor market and solid consumer spending indicators. The U.S. Department of Labor reported that weekly new unemployment insurance claims for the week ending the 24th fell by 16,000 to 193,000, the lowest weekly figure since April.

Volatility in the bond market has surged sharply following the UK’s tax cut policy announcement, sustaining global financial market uncertainty. Market experts note that concerns over simultaneous tightening have not been resolved, indicating that the fundamental causes of recent volatility remain.

Mark Haefele of UBS said in an investor memo that despite the calmer atmosphere the previous day, he remains skeptical that the spike in volatility or risk aversion has ended. "For central banks to turn less hawkish, investors need to see strong evidence that inflation is under control," he said.

The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street’s "fear gauge," rose more than 5% to around the 31 level.

Oil prices slightly declined as markets watched the aftermath of Hurricane Ian, which hit Florida, and the upcoming OPEC+ oil-producing countries meeting scheduled for next week. On the New York Mercantile Exchange, November West Texas Intermediate (WTI) crude oil closed down 92 cents (1.12%) at $81.23 per barrel.