New York Stock Market Declines Early Amid Rising Treasury Yields and Shutdown Concerns

The three major indices of the U.S. New York stock market showed a downward trend in the early trading session on Monday, September 25 (local time), the last Monday of September. Investor sentiment is being weighed down amid a sharp rise in U.S. Treasury yields following a more hawkish-than-expected September Federal Open Market Committee (FOMC) meeting and growing concerns over a potential federal government shutdown.

At around 10:51 a.m. at the New York Stock Exchange, the Dow Jones Industrial Average was trading at around 33,819, down 143.92 points (0.42%) from the previous close. The S&P 500 index was at 4,312, down 7.26 points (0.17%), and the Nasdaq index was at 13,189, down 22.81 points (0.17%).

Currently, all sectors in the S&P 500 except for energy and consumer discretionary stocks are in decline. Amazon rose more than 1% after announcing a $4 billion investment plan in AI company Anthropic. Nvidia, which has been leading the AI rally, also jumped over 1%. 3M fell more than 2%, dragging down the Dow. Netflix, Walt Disney, Warner Bros., and others rose slightly following news that the striking Writers Guild of America in Hollywood reached a tentative agreement with production companies.

[Image source=AFP Yonhap News]

Investors are currently watching the movements of Treasury yields, the dollar, and oil prices, which have been rising since the September FOMC, along with the possibility of a U.S. federal government shutdown. In the New York bond market, the 10-year U.S. Treasury yield surpassed 4.52%, marking the highest level since 2007. The 2-year yield also exceeded 5.1%. The Dollar Index, which measures the value of the dollar against six major currencies, approached the 106 level.

Jay Hartfield, CEO of Infrastructure Capital Management, diagnosed, "Not only U.S. Treasuries but all global government bonds are experiencing selling pressure, which is weighing on the stock market." Pawaad Rajakwad, a market analyst at Forex.com and Citi Index, said, "The market has been struggling in recent weeks due to rising international oil prices and bond yields."

September is typically a weak month for the New York stock market. The Nasdaq, which is tech-heavy, has been hit hard by growth stocks this month, falling 6%. The S&P 500 also dropped more than 4%, marking a decline for two consecutive months. During the same period, the Dow fell about 2%.

Currently, amid ongoing concerns about tightening, the risk of a U.S. federal government shutdown has surged. To prevent a shutdown, the budget must be passed before October 1, when the 2024 fiscal year begins. However, hardliners within the Republican majority in the House, who hold the authority to review the budget bill, are demanding significant cuts, and with only a few days left, no breakthrough in negotiations is yet in sight.

In the event of a shutdown, federal government employees except for essential personnel will stop working without pay, and some social welfare programs, such as food assistance for low-income groups, will face disruptions. At this critical time when inflation concerns are resurfacing, delays or suspensions in the release of key economic indicators are expected to increase uncertainty surrounding monetary policy.

Other factors that could burden the market include the expansion of the United Auto Workers (UAW) strike, the resumption of student loan repayments starting in October, and high oil prices. International oil prices are trading in a narrow range today. West Texas Intermediate (WTI) crude oil prices are down 0.09% from the previous close at $89.97 per barrel, while Brent crude oil prices are up 0.12% at $93.38 per barrel.

This week, remarks from Federal Reserve (Fed) officials and major economic data releases are scheduled. Austan Goolsbee, president of the Chicago Fed and considered a prominent dove within the Fed, appeared on CNBC's Squawk Box today and said, "The Fed is approaching a point where it can hold rates steady." He added, "We are closer to a point where how long rates stay high is more important than how high they go."

Fed Chair Jerome Powell will speak at an online town hall meeting on the 28th. John Williams, president of the New York Fed and considered the third most influential Fed official, will speak on the 29th. Additionally, the September Conference Board Consumer Confidence Index, the final second-quarter GDP figures, Personal Consumption Expenditures (PCE), and the University of Michigan Consumer Sentiment Index are scheduled for release this week. Economic data released today was weak. The Chicago Fed National Activity Index for August was -0.16, down from a revised 0.07 in the previous month. A negative reading indicates growth below the long-term average.

European stock markets are all falling. Germany's DAX index is down 1.3% from the previous close. The UK's FTSE index is down 1.20%, and France's CAC index is down 1.21%.