[New York Stock Market] Decline Amid Digesting Powell's Remarks on 'Delayed Interest Rate Cut'... Nvidia Drops 3.87%

Tech Stocks Including Nvidia Fall
Bond Yields Ease...Oil and Dollar Value Also Decline

The three major indices of the New York stock market all closed lower on the 17th (local time). Following Federal Reserve (Fed) Chair Jerome Powell's indication of a delay in interest rate cuts the previous day, the decline was particularly notable among technology stocks.

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On this day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 37,753.31, down 45.66 points (0.12%) from the previous trading day. The large-cap S&P 500 index fell 29.2 points (0.58%) to 5,022.21, and the tech-heavy Nasdaq index dropped 181.88 points (1.15%) to 15,683.37.

Among individual stocks, technology shares experienced significant declines. AI superstar Nvidia fell 3.87%. Meta, the parent company of Facebook, dropped 1.12%. Apple and Microsoft (MS) declined by 0.81% and 0.66%, respectively. Netflix also fell 0.62%. Tesla, which is re-pursuing a $56 billion (approximately 77.6 trillion KRW) compensation package for CEO Elon Musk, dropped 1.06%. United Airlines surged 17.45% following better-than-expected earnings.

Kevin Gordon, senior investment strategist at Charles Schwab, analyzed, "Investors are trimming some high-yield stocks," adding, "They are beginning to understand that there are other parts of the market performing well."

Investor sentiment worsened after Powell signaled a delay in rate cuts the previous day. Although bond selling eased and yields fell, prompting some indices to attempt a rebound, the market ultimately closed lower.

At a Canadian economic forum held in Washington D.C. the previous day, Powell stated, "Recent data has not clearly provided greater confidence that inflation is making progress toward the Fed's goals," and "Instead, it suggests that achieving such confidence may take longer than expected." He further explained, "Given the current strength of the labor market and the inflation progress so far, it is appropriate to allow restrictive policies time to be effective."

The market interprets the Fed's maintenance of three rate cuts within the year at the March Federal Open Market Committee (FOMC) meeting as a revision of the dot plot. According to The Wall Street Journal (WSJ), Wall Street has mostly withdrawn its expectation of a rate cut in June and now anticipates only one or two cuts this year. According to the Chicago Mercantile Exchange (CME) FedWatch tool, federal funds futures on this day reflected a 46% probability of a 0.25 percentage point or greater rate cut at the July FOMC and about a 72% probability at the September meeting.

Ross Mayfield, investment strategy analyst at Baird, diagnosed, "The main headwind is a hawkish repricing of Fed expectations," adding, "The market has reached a point where it questions whether there will be any rate cuts in 2024."

On this day, the Fed released the Beige Book, a report on economic conditions, stating that "overall economic activity expanded slightly, on balance, since late February." Of the 12 districts, 10 showed slight or modest growth. In the previous Beige Book, eight districts showed growth, so this time two more districts showed expansion. The Beige Book, which assesses economic trends across the 12 Federal Reserve Bank districts, will serve as a basis for the upcoming FOMC regular meeting from the 30th of this month to the 1st of next month.

Investors are also cautious about the direct conflict between Iran and Israel and the possibility of escalation.

Mark Hacket, head of investment research at Nationwide, analyzed, "Geopolitical uncertainty, rate hikes, a hawkish Fed, and inflation frustrations are combining to push the market into a temporary bear market."

Bond yields, which surged the previous day, have calmed. The U.S. 10-year Treasury yield, a global bond yield benchmark, fell 7 basis points (1 bp = 0.01 percentage point) to 4.58%, while the 2-year Treasury yield, sensitive to monetary policy, dropped 3 basis points to around 4.93%.

International oil prices plunged. The increase in U.S. crude inventories, weak Chinese economic indicators, and expectations of demand slowdown due to delayed Fed rate cuts overlapped. West Texas Intermediate (WTI) crude closed at $82.69 per barrel, down $2.67 (3.1%) from the previous day, and Brent crude, the global oil price benchmark, fell $2.73 (3%) to $87.29.

The dollar weakened. The Dollar Index, which measures the dollar's value against six major currencies, stood at 105.76 at 4:29 p.m., down 0.29% from the previous trading day.