[New York Stock Market] Despite Major Countries' Tightening... Nasdaq Rises 0.95% on Tech Stocks' Bargain Buying

The three major indices of the U.S. New York stock market closed mixed on the 22nd (local time). Despite repeated hawkish (preference for monetary tightening) remarks by Jerome Powell, Chairman of the Federal Reserve (Fed), and interest rate hikes by major countries including the UK, the S&P 500 and Nasdaq indices, which had been on a recent downward trend, rebounded for the first time in four trading days, supported by bargain buying of tech stocks.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,946.71, down 4.81 points (0.01%) from the previous session. The large-cap focused S&P 500 index rose 16.20 points (0.37%) to 4,318.89, and the tech-heavy Nasdaq index closed up 128.41 points (0.95%) at 13,630.61.

Within the S&P 500, technology, communication, and discretionary consumer stocks rose, while energy, real estate, and industrial stocks fell. Amazon, which had closed lower the previous day due to FTC lawsuit news, jumped more than 4%, confirming a rebound among major tech stocks. Microsoft, Apple, and Google Alphabet all showed gains in the 1-2% range. Tesla rose more than 1% despite Morgan Stanley lowering its investment rating to 'equal weight' following Barclays' downgrade the day before. Aluminum company Alcoa fell more than 4% after Morgan Stanley downgraded its rating to 'underweight.'

E-commerce company Overstock.com surged over 17% on news that it won the auction for Bed Bath & Beyond's intellectual property rights. Auto insurance company Root soared more than 34% following foreign media reports that Embedded Insurance attempted to acquire it at $19.34 per share. Spirit AeroSystems, a Boeing supplier, fell nearly 10% as workers decided to strike, halting operations at its Kansas plant. As a result, Boeing also dropped 3%.

[Image source=Reuters Yonhap News]

Investors monitored Powell's semiannual monetary policy report for the second consecutive day, as well as interest rate hikes by central banks in the UK and other countries, while also showing rebound buying after three consecutive days of declines. Terry Sandven, Chief Equity Strategist at U.S. Bank Wealth Management, told CNBC, "The market is in a pause mode," adding, "There is a tug-of-war between the bulls and bears, indicating increased uncertainty and volatility in the near future."

Powell appeared before the Senate Banking Committee hearing that day and stated, "The majority of Federal Open Market Committee (FOMC) members believe there will be two rate hikes this year." This reaffirmed the hawkish stance, following his evaluation of the dot plot predicting two rate hikes within the year as a "pretty good guess" at the House Financial Services Committee the previous day. However, since these remarks were mostly repetitions, their impact on market sentiment was limited.

Powell explained, "Last year, it was very important to move quickly, so we did," adding, "Now we are close to the destination, and it is appropriate to move at a cautious pace." The Fed raised rates ten consecutive times from March last year, bringing them to 5.0-5.25%, but at the June 14 FOMC meeting, it decided to pause for the first time. He said the June pause was "to buy more time to make decisions" and that he did not want to make the mistake of tightening "too much, too fast."

Currently, the market widely expects the Fed to resume rate hikes at the next July FOMC meeting. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds (FF) futures market is pricing in nearly a 77% chance of a baby step hike in July. However, unlike the Fed's dot plot, which raised the year-end median rate to 5.6% and predicted two additional hikes this year, the futures market still favors a scenario of one hike followed by a pause.

On the same day, Fed Governor Michelle Bowman also supported more than two additional rate hikes this year. At an event, Bowman said, "I supported the pause decision at last week's FOMC," but added, "Additional policy rate increases are needed to bring inflation down to target." She emphasized that rates must be raised to a sufficiently restrictive level for inflation to approach the 2% target.

On the same day, the Bank of England (BOE) raised its interest rate by 0.5 percentage points to 5.0%, the highest level in 15 years since the 2008 global financial crisis. The Central Bank of T?rkiye raised rates by 6.5 percentage points from 8.5% to 15%. The Central Bank of T?rkiye confirmed it would "strengthen monetary tightening in a timely and gradual manner until inflation expectations improve significantly." The central banks of Switzerland and Norway also raised rates.

In the New York bond market that day, Treasury yields rose. The 10-year Treasury yield was around 3.79%, and the 2-year Treasury yield, sensitive to monetary policy, was around 4.78%. The dollar index, which shows the value of the dollar against six major currencies, rose more than 0.3% to 102.4. The Volatility Index (VIX), known as Wall Street's fear gauge, fell more than 2% from the previous session, staying below 13.

The unemployment data released that day exceeded expectations. According to the U.S. Department of Labor, initial jobless claims for the week of June 11-17 were 264,000, unchanged from the previous week. This exceeded the expert forecast of 256,000 compiled by The Wall Street Journal (WSJ), marking the highest number in 20 months since October 2021. This is interpreted as a sign that the Fed's aggressive tightening policy is gradually affecting the labor market. The previous week's claims were revised up by 2,000 from the initially reported 262,000.

Last month, U.S. home prices fell the most in 11 and a half years. According to the National Association of Realtors (NAR), the median price of existing homes in May was $396,100 (about 515 million KRW), down 3.1% year-on-year. This is the largest drop since December 2011. Existing home sales in May recorded 4.3 million units (annualized), slightly exceeding the expert forecast of 4.25 million units compiled by WSJ. This was a 0.2% increase from the previous month but a 20.4% decrease compared to a year ago.

Oil prices fell amid tightening moves by various countries. On the New York Mercantile Exchange, August delivery West Texas Intermediate (WTI) crude oil closed at $69.51 per barrel, down $3.02 (4.16%) from the previous session.