[New York Stock Market] US Retail Sales Surprise Increase, Treasury Yields Surge... Broad Decline

US 10-Year Treasury Yield Surpasses 4.6%
March Retail Sales Increase 0.7%, Exceeding Expectations
International Oil Prices Decline

The three major indices of the U.S. New York stock market all closed lower on the 15th (local time). The surprise growth in retail sales last month heightened inflation concerns, causing a sharp rise in Treasury yields and significantly worsening investor sentiment. The 10-year U.S. Treasury yield surpassed the 4.6% level, the highest in five months, while the 2-year yield is threatening the 5% mark. News that Israel, attacked on its mainland by Iran on the 13th, is avoiding full-scale war but focusing on "painful retaliation" also weighed on market sentiment.

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On that day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average fell 248.13 points (0.65%) from the previous trading day to close at 37,735.11. The large-cap-focused S&P 500 index dropped 61.59 points (1.2%) to 5,061.82, and the tech-heavy Nasdaq index fell 290.08 points (1.79%) to close at 15,885.02.

The March retail sales data released that day significantly exceeded market expectations, worsening investor sentiment. According to the U.S. Department of Commerce, retail sales increased by 0.7% month-over-month last month, surpassing the expert forecast of 0.4%. Among the 13 retail categories, 8 showed growth. E-commerce consumption rose by 2.7%, gas station sales increased by 2.1%, while automobile sales declined by 0.7%.

Retail sales are considered a key indicator reflecting the overall economic trend, accounting for two-thirds of the U.S. real economy. A robust labor market supporting consumption raised concerns about the entrenchment of hot inflation. As expectations grew that the Federal Reserve (Fed) would be more cautious about cutting interest rates, Treasury yields surged. The 10-year U.S. Treasury yield, a global bond yield benchmark, rose 11 basis points (1bp = 0.01 percentage points) from the previous trading day to around 4.61%, the highest level in five months since mid-November last year. The 2-year Treasury yield, sensitive to monetary policy, increased by 4 basis points to 4.92%.

Andrew Hunter, Deputy U.S. Economist at Capital Economics, analyzed, "The recent revival in job growth and the continued resilience of consumption are further reasons to doubt that the Fed will start cutting rates anytime soon."

As the "no landing" scenario, where the U.S. economy continues to grow without a downturn, spreads, some even predict no rate cuts within the year. Thorsten Slok, an economist at Apollo Global Management, forecasted, "Considering the economy is continuing to reaccelerate, the Fed will not cut rates in 2024."

Meanwhile, John Williams, President of the Federal Reserve Bank of New York, appeared on Bloomberg TV that day, pointing out the strength of consumption and the overall economy but stating that if inflation gradually eases, the Fed will begin cutting the benchmark interest rate within the year.

Market concerns also increased over Israel's level of retaliation against Iran, adding pressure to the stock market. The U.S. has repeatedly urged Israel to restrain retaliation to prevent escalation, and Iran has stated it will not carry out additional attacks unless Israel retaliates, somewhat easing fears of a "fifth Middle East war." However, reports that Israel is avoiding full-scale war but focusing on painful retaliation have kept market anxiety high.

Emily Bowersock Hill, CEO of Bowersock Capital Partners, analyzed, "Historically, geopolitical shocks have caused short-term volatility rather than long-term market declines. However, in the current situation, considering the potential oil price shocks from heightened Middle East tensions, the risk of prolonged volatility has increased."

The future direction of asset markets depends on Israel's response approach and intensity toward Iran. Krishna Guha, Senior Managing Director at Evercore ISI, analyzed, "If Israeli Prime Minister Benjamin Netanyahu appears willing to follow U.S. advice, there could be some relief rallies in the market."

By sector, technology stocks all declined. Microsoft (MS) fell 1.96%. Apple dropped 2.19% after news that first-quarter iPhone shipments decreased by about 10% due to weak sales in China. Nvidia also fell 2.48%. Tesla, struggling with weak electric vehicle sales, plunged 5.59% after announcing plans to cut 10% of its global workforce. Goldman Sachs rose 2.92% on strong first-quarter earnings.

International oil prices fell as the U.S. made every effort to prevent escalation in the Middle East. West Texas Intermediate (WTI) crude oil dropped $0.25 (0.29%) to $85.41 per barrel, and Brent crude, the global oil price benchmark, fell $0.35 (0.39%) to $90.10 per barrel.