[New York Stock Market] Recession Concerns Amid Monetary Tightening and Weak Retail Sales... Dow Down 2.25%

[Asia Economy Reporter Jeong Hyunjin] On the 15th (local time), the Dow Jones Industrial Average, a major index in the US New York stock market, closed down 2.25%, the largest drop since last September. Following the US Federal Reserve (Fed), major central banks such as the European Central Bank (ECB) and the Bank of England (BOE) continued their tightening measures, and with US retail sales and industrial production data for last month showing a larger-than-expected decline, fears of an economic recession intensified.

[Image source=Reuters Yonhap News]

On the 15th (local time) in the New York stock market, the Dow Jones Industrial Average closed at 33,202.22, down 2.25% (764.13 points) from the previous session. The S&P 500, which focuses on large-cap stocks, fell 2.49% to 3,895.75, and the tech-heavy Nasdaq dropped 3.23% to 10,810.53. The Dow recorded its worst day since last September, while the S&P 500 and Nasdaq experienced their largest declines since November, according to foreign media reports.

The plunge in the New York stock market was influenced by the interest rate hikes announced by major central banks and US economic indicators released that day. The ECB and BOE both implemented a 'big step' (a 0.50 percentage point increase in the benchmark interest rate), matching the Fed's decision the previous day. Although the rate hike was smaller than before, they expressed their intention to continue monetary tightening, stating that additional measures are still necessary to control inflation. Fed Chair Jerome Powell also said the day before that they would not consider cutting rates until there is clear evidence that inflation is definitively declining, adding, "There is still a long way to go."

However, the market remains skeptical. Given the rapidly growing recession concerns, it is seen as unlikely that central banks will easily continue their existing monetary tightening policies.

In particular, the US economic data released that day further heightened recession fears. According to Bloomberg and others, the US Department of Commerce reported that November retail sales fell 0.6% compared to the previous month. This was the largest decline in 11 months since December last year (-2.0%), and the decrease was greater than the expert forecast of -0.2% compiled by Bloomberg. On the same day, US industrial production for November decreased by 0.2% month-on-month. Manufacturing production also declined by 0.6% in November, marking the first decrease in five months since June.

Foreign media such as Bloomberg and The Wall Street Journal (WSJ) evaluated these declines in consumption and industrial production as the result of the Fed's efforts to curb inflation through interest rate hikes.

Accordingly, Morgan Stanley predicted that the Fed would halt rate hikes in February next year, expecting that worsening economic conditions would make further increases difficult.

Nadia Lovell, Senior Strategist at UBS, said, "Today's market decline is not surprising. The market traded with the hope that the Fed would not do what they said they would," adding that a recession has not yet been priced in and that this will be reflected and recalibrated in the first half of next year.

Meanwhile, international oil prices fell due to expanding recession concerns and other factors. On the New York Mercantile Exchange, the price of West Texas Intermediate (WTI) crude oil for January delivery closed at $76.11 per barrel, down 1.51% from the previous session. WTI prices turned downward after four consecutive days of gains.