[New York Stock Market] Declines Ahead of Thanksgiving Amid Concerns Over China Lockdown... Nasdaq Down 1.09%

[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 Monday, the 21st (local time), ahead of the Thanksgiving holiday, amid growing concerns over the spread of COVID-19 in China.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,700.28, down 45.41 points (0.13%) from the previous session. The S&P 500, focused on large-cap stocks, ended at 3,949.94, down 15.40 points (0.39%), and the tech-heavy Nasdaq closed at 11,024.51, down 121.55 points (1.09%).

By sector, energy-related stocks weakened as international oil prices plunged due to concerns over COVID-19 lockdowns in China and reports of oil-producing countries considering production increases. Diamondback Energy closed down 3.99% from the previous session. Occidental Petroleum fell 2.33%, and ExxonMobil slipped 1.0%. Technology stocks also underperformed. Tesla dropped 6.84%, hitting its lowest level since July 2020. Apple (-2.17%), Amazon (-1.78%), Google Alphabet (-1.88%), and Meta (-1.95%) all declined together.

Walt Disney surged 6.30% on news of the return of former CEO Robert Iger (Bob Iger), who served as CEO from 2005 to 2020 and built the so-called 'Disney World.' Used car company Carvana plummeted 12.53% following Argus's downgrade of its investment rating and an announcement that online sales expansion has partially eroded the competitive advantage of existing stores. The stock price of Coinbase also fell nearly 9% amid the ongoing fallout from the bankruptcy filing of FTX, one of the world's top three cryptocurrency exchanges.

Investors showed caution ahead of this week's Thanksgiving and Black Friday. The market will be closed on the 24th for the Thanksgiving holiday and will close early at 1 p.m. on the 25th, resulting in relatively low trading volume for the week. Investors are also paying attention to consumer trends during Black Friday week. Retailers such as Best Buy, Nordstrom, and Dollar Tree are scheduled to release earnings this week.

Meanwhile, the intensifying spread of COVID-19 and strengthened lockdowns in China are exerting downward pressure on the New York stock market. New daily confirmed cases in China have exceeded 20,000 for four consecutive days, and deaths have been reported in Beijing.

Art Hogan, Chief Market Strategist at B. Riley Financial, said, "The reopening of the Chinese economy is denting the global economic recovery story we had expected." Susanna Streeter, Senior Investment Analyst at Hargreaves Lansdown, pointed out, "The increase in COVID-19 cases and strengthened lockdowns in China are causing concerns that manufacturing output and raw material demand will decline, impacting financial markets."

The increased possibility of a U.S. railroad strike also worsened investor sentiment. Some major railroad unions have rejected a tentative agreement arranged by the White House. If railroad operations, which handle about 30% of freight transportation in the U.S., are halted, the estimated daily economic loss could reach $2 billion.

Economic indicators were also weak. The Chicago Fed National Activity Index for October turned negative at -0.05, indicating that growth in October was below the long-term average. The October Leading Economic Index also fell to 0.13 from 0.25 in the previous month.

Currently, investors are also awaiting further clues on the Federal Reserve's monetary policy. The FOMC minutes will be released on the 23rd. Mary Daly, President of the Federal Reserve Bank of San Francisco, mentioned that the impact of rate hikes is greater than it appears. She stated that rate hikes will continue but the pace of increases may slow. This week, speeches are also scheduled from Loretta Mester, President of the Federal Reserve Bank of Cleveland, and James Bullard, President of the Federal Reserve Bank of St. Louis.

In the New York bond market on this day, Treasury yields remained steady. The 10-year U.S. Treasury yield traded around 3.827%, up 1 basis point from the previous session at around 4 p.m. As risk aversion increased, the dollar strengthened. The Dollar Index, which measures the value of the dollar against six major currencies, rose more than 0.8% to around 107.8.

Goldman Sachs said, "the recent rally is temporary," and predicted that the stock market could bottom out next year. The forecast for the S&P 500 index in December next year is 4000. On the other hand, Oppenheimer assessed that the recent rally in the S&P 500 shows sufficient resilience indicating that the stock market will improve further in 2023. They also evaluated that recent inflation data suggests the Fed's rate hikes are working as intended.

International oil prices slipped below $80 per barrel. On the New York Mercantile Exchange, December West Texas Intermediate (WTI) crude oil closed at $79.73 per barrel, down 35 cents (0.44%) from the previous session. This is the first time since September 30 that prices fell below $80 per barrel. During the session, WTI briefly dropped more than 3.5% to the $77 per barrel range.

This was due to increased concerns that demand will weaken amid the spread of COVID-19 in China. Reports that oil-producing countries, including Saudi Arabia, are considering production increases also exerted downward pressure. On this day, the Wall Street Journal (WSJ), citing sources, reported that at the OPEC Plus meeting scheduled for December 4, a plan to increase production by up to 500,000 barrels per day is being discussed.

On the same day, Goldman Sachs lowered its Brent crude oil forecast for the next five quarters from $110 to $100 per barrel. Goldman Sachs explained that the reasons for this downward revision include China's COVID-19 lockdowns and uncertainties surrounding the G7's planned price cap on Russian oil.