[New York Stock Market] Investor Sentiment Cools Amid China COVID Protests... Nasdaq Down 1.58%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York stock market closed lower on the 28th (local time) as risk aversion intensified due to social unrest such as protests stemming from the prolonged COVID-19 lockdowns in China.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 497.57 points (1.45%) from the previous close to finish at 33,849.46. The S&P 500, focused on large-cap stocks, dropped 62.18 points (1.54%) to 3,963.94, and the tech-heavy Nasdaq index declined 176.86 points (1.58%) to close at 11,049.50.

All 11 sectors of the S&P 500 index fell. In particular, energy stocks saw notable losses as international oil prices plunged sharply early in the session. ExxonMobil closed down 3.0% from the previous day. Chevron fell 2.91%, and Occidental Petroleum dropped 2.92%. Semiconductor stocks such as Nvidia (-2.27%), AMD (-2.60%), and Qualcomm (-3.17%) also underperformed.

Apple declined 2.63% following reports that iPhone Pro production could decrease by 6 million units due to instability at its factories in China. Signature Bank fell 4.26% after cryptocurrency lending firm BlockFi filed for bankruptcy. Biogen dropped more than 4% after reports that a woman participating in an Alzheimer's treatment trial recently died from a brain hemorrhage. On the other hand, Wynn Resorts and Melco Resorts shares surged 4.36% and 9.86%, respectively, on news that they secured temporary licenses from the Chinese government to operate casinos in Macau.

Investors focused on protests related to China's COVID-19 lockdowns, the shopping season mood following the U.S. Black Friday, and remarks from Federal Reserve (Fed) officials. Recently, protests against prolonged lockdowns have continued mainly in Beijing and Shanghai. This has raised concerns about further disruptions to the global supply chain, increasing downward pressure especially on companies with large-scale production facilities in China.

Victoria Fernandez, Chief Market Strategist at Crossmark Global Investments, commented, "The disruption of iPhone orders due to the closure of Apple's Chinese factories is a perfect example of how an event in one country affects others." She added, "It shows the ripple effect on the global economy when something as significant as a shutdown occurs in China."

Online sales on U.S. Black Friday reached $9.12 billion (estimated by Adobe), up 2.3% from the same period last year. Cyber Monday sales were also expected to surpass $1 billion. Despite high inflation, online consumption during the year-end shopping season showed resilience. Investors appeared to seek additional clues about consumer and U.S. economic conditions from upcoming inflation data and the November employment report to be released this week.

The Dallas Fed manufacturing index for November, released on this day, showed a negative reading for the seventh consecutive month. However, it improved to -14.4 from -19.4 in the previous month.

Fed officials continued to make hawkish (monetary tightening) remarks. John Williams, President of the Federal Reserve Bank of New York, said in a speech at the New York Economic Club, "We need to raise interest rates further to curb inflation," emphasizing, "It is necessary to maintain restrictive levels at least through next year." James Bullard, President of the Federal Reserve Bank of St. Louis, stated in a live webinar hosted by Barron's, "Rate hikes must continue through 2023," warning that the market might be underestimating the Fed's actions. He also mentioned that even if inflation improves, rate cuts should be postponed next year.

In the New York bond market on this day, the 10-year U.S. Treasury yield remained largely unchanged at 3.701% compared to the previous trading day. The 2-year yield, sensitive to monetary policy, fell slightly to 4.469%. The decline in Treasury yields indicates a rise in prices of these safe-haven assets.

The U.S. dollar, another major safe-haven asset, also strengthened. The Dollar Index, which measures the dollar's value against six major currencies, rose more than 0.6% to around 106.6.

Alongside this, Bitcoin fell following the bankruptcy filing of cryptocurrency lending firm BlockFi, following the collapse of one of the world's top three cryptocurrency exchanges, FTX. Currently, Bitcoin is trading around $16,200, down about 2% from the previous close.

International oil prices, which hit intraday lows due to concerns over China's COVID-19 unrest, later reversed to an upward trend. On the New York Mercantile Exchange, January WTI crude oil futures closed at $77.24 per barrel, up 96 cents (1.26%) from the previous close. Analysts attributed the rise to expectations of production cuts by oil-producing countries.