[New York Stock Market] Declines Amid Recession Concerns... Dow Records Largest Drop Since March

The three major indices of the U.S. New York stock market all closed lower on the 26th (local time) amid growing concerns about an economic slowdown due to prolonged high interest rates and weak economic indicators.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average, which focuses on blue-chip stocks, closed at 33,618.88, down 388.00 points (1.14%) from the previous session. This decline in the Dow was the largest since March this year. The S&P 500, which centers on large-cap stocks, fell 63.91 points (1.47%) to 4,273.53. It was the first time since June 9 that the S&P 500 dropped below the 4,300 level. The tech-heavy Nasdaq index ended the day at 13,063.61, down 207.71 points (1.57%).

All 11 sectors within the S&P 500 recorded declines. In particular, utility-related stocks fell more than 3%. Amazon slid over 4% following news that the U.S. Federal Trade Commission (FTC), along with 17 states, filed an antitrust lawsuit. Tesla dropped by more than 1% after reports that it was included in the European Union’s investigation into subsidies for Chinese electric vehicles. Leading tech stocks such as Apple (-2.34%), Google Alphabet (-1.94%), and Microsoft (-1.70%) also showed broad weakness. Bank stocks like Wells Fargo (-2.19%) and Citi (-1.95%) underperformed as well. On the other hand, DraftKings rose more than 2% after JP Morgan upgraded its investment rating.

[Image source=Getty Images Yonhap News]

Investors closely monitored movements in Treasury yields and the dollar, the possibility of a U.S. federal government shutdown, and economic data released that day. Based on expectations of prolonged high interest rates, Treasury yields continued their upward trend. In the New York bond market, the 10-year Treasury yield surpassed 4.5% the previous day, reaching its highest level since 2007, and rose further on this day. The 2-year yield, which is sensitive to monetary policy, also edged up to around 5.13%. The Dollar Index, which measures the value of the U.S. dollar against six major currencies, exceeded the 106.1 level.

Sam Stovall, Chief Investment Strategist at CFRA, said, "Investors remain uneasy about the impact that rising Treasury yields will have on the economy, the stock market, the Federal Reserve (Fed), and the value of the dollar." Michael Antonelli, Market Strategist at Baird, commented, "A strong dollar and interest rate hikes are all that really matter right now."

This rise in Treasury yields, combined with weak economic data, further highlighted concerns about an economic slowdown. According to the Department of Commerce, new home sales in August fell 8.7% month-over-month to 675,000 units, below Wall Street’s forecast of 695,000 units. The Conference Board’s Consumer Confidence Index for September also came in at 103, below both the previous month’s 108.7 and market expectations of 105.5. Particularly concerning is the expectations index, which dropped to 73.7, indicating recession-level sentiment in the economy.

[Image source=Getty Images Yonhap News]

International oil prices, which fuel inflation concerns, also turned upward. Despite worries about an economic slowdown, expectations of supply shortages in the fourth quarter have come to the fore. On this day at the New York Mercantile Exchange, the November delivery price of West Texas Intermediate (WTI) crude oil rose 71 cents (0.79%) to close at $90.39 per barrel. This closing price was the highest since the 19th of the month.

Currently, investors are also paying attention to the risk of a U.S. federal government shutdown. In the event of a shutdown, initial public offerings (IPOs), including those of Birkenstock, could be delayed. SEC Chair Gary Gensler stated that the Securities and Exchange Commission (SEC) would operate with only some of its regular staff during a shutdown.

To prevent a shutdown, the U.S. Congress must pass a budget before October 1, when the 2024 fiscal year begins, but a deadlock persists. Hardliners within the House Republican majority, who hold the authority to review the budget bill, are demanding large-scale cuts. The day before, Moody’s, one of the world’s three major credit rating agencies, warned that a shutdown would negatively affect the United States’ national credit rating.

[Image source=Getty Images Yonhap News]

This week, speeches by Fed officials and major economic data releases are scheduled. 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 finalized second-quarter GDP, Personal Consumption Expenditures (PCE), and the University of Michigan Consumer Sentiment Index are also expected to be released during the week.