[New York Stock Market] Big Tech Plunge Leads to Broad Decline... Nasdaq Down 1.16%

The three major indices of the U.S. New York stock market all closed lower on Monday, June 26 (local time), the last Monday of June. Amid attention to the upcoming speeches by Jerome Powell of the Federal Reserve (Fed), inflation indicators, and the aftermath of the armed rebellion by the Russian mercenary company Wagner Group, the decline in big tech stocks, which had recently led the rally, was prominent.

On that day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,714.71, down 12.72 points (0.04%) from the previous session. The S&P 500, focused on large-cap stocks, closed at 4,328.82, down 19.51 points (0.45%), and the tech-heavy Nasdaq closed at 13,335.78, down 156.74 points (1.16%).

While the three major indices moved sideways in the early session, they widened their losses in the afternoon. The decline in tech stocks was especially confirmed. Adam Sarhan, CEO of 50 Park Investments, said, "The market is in digestion mode," adding, "This year, we had made significant gains centered on big tech and the Nasdaq 100 index." Art Hogan, chief market strategist at B. Riley Financial, assessed, "The S&P 500 is hitting resistance, and last week's retreat was essentially tech-driven."

Within the S&P 500, stocks related to technology, communication, discretionary consumer goods, health, and finance fell, while those related to real estate, energy, industrials, utilities, materials, and staples rose. Representative tech stocks Tesla and Google Alphabet fell by 6% and 3%, respectively, after Goldman Sachs and UBS downgraded their investment ratings. Nvidia, which had continued its rally fueled by the artificial intelligence (AI) boom, also dropped nearly 4%. Meta Platforms, which launched a virtual reality (VR) subscription service, fell 3.55%. Lucid surged double digits after announcing a partnership with British automaker Aston Martin but later trimmed gains to just over 1%. On the other hand, real estate-related stocks such as DR Horton, NVR, and PulteGroup all rose. Regional bank stock WSFS Financial rose nearly 5% on a buy rating from DA Davidson.

[Image source=Reuters Yonhap News]

Investors are watching the correction phase centered on big tech while awaiting Powell's scheduled speech this week, the Fed's inflation indicator PCE index, and U.S. economic growth figures, seeking hints about the central bank's future tightening moves.

Powell will attend the Sintra Forum hosted by the European Central Bank (ECB) on the 28th as a policy panelist alongside ECB President Christine Lagarde and others. Discussions are expected on fiscal and monetary policy amid high inflation and inflation itself. Additionally, on the 29th, Powell will have a dialogue with Hern?ndez de Cos, Governor of the Bank of Spain, in Madrid. Following his recent congressional hearing where he hinted at the possibility of two rate hikes this year, attention is focused on whether such hawkish remarks will continue.

Economic indicators will also be released later this week. The final U.S. first-quarter Gross Domestic Product (GDP) figure will be released on the 29th, and the U.S. May PCE price index will be published on the 30th. The market estimates that the May core PCE will rise 4.6% year-over-year and 0.3% month-over-month, a slight slowdown compared to the previous month. However, if inflation indicators show stronger-than-expected levels, tightening pressure on the Fed could increase.

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, the federal funds (FF) rate futures market is pricing in nearly a 77% chance of a "baby step" hike in July. However, unlike the Fed's dot plot, which forecasts two hikes this year, the rate futures market still favors a scenario of one hike followed by a pause.

Also this week, earnings reports will be released from U.S. semiconductor company Micron, recently targeted by the Chinese government in the tech supremacy competition, leading consumer goods company Nike, Walgreens Boots Alliance, and others. Consumers are expected to watch these to gauge the impact of U.S.-China tensions on semiconductor companies and the current state of U.S. consumption.

Geopolitical risks have also increased over the weekend due to the rebellion by the Russian mercenary company Wagner Group. CNBC reported that traders are watching Europe closely, warning that the current uncertainty could make markets nervous. However, the impact on the U.S. stock market that day was limited. Tom Essaye, founder of The Sevens Report Research, acknowledged the geopolitical uncertainty from Russia but predicted, "Unless commodity prices surge sharply, the market will ignore it."

U.S. President Joe Biden dismissed Russian claims that the West was involved in the Wagner Group's rebellion. Russian President Vladimir Putin, in his first official statement after the rebellion in a televised address, said, "It has shown that all threats and chaos are doomed to fail," adding, "The armed rebellion would have been suppressed in any case." The Wagner Group, led by Prigozhin, which staged the armed rebellion on the 24th, halted its advance and withdrew within a day through mediation by Belarusian President Alexander Lukashenko.

In the New York bond market that day, Treasury yields declined. The 10-year Treasury yield hovered around 3.72%, and the 2-year Treasury yield, sensitive to monetary policy, was around 4.74%. The dollar index, which shows the value of the dollar against six major currencies, was about 0.1% lower than the previous session at 102.7. The volatility index (VIX), known as Wall Street's fear gauge, rose more than 6% from the previous session, breaking above 14 again. However, it remains well below the long-term average of 20.

Oil prices rebounded after three trading days. At the New York Mercantile Exchange, August delivery West Texas Intermediate (WTI) crude oil prices closed at $69.37 per barrel, up 21 cents (0.30%) from the previous session.