[New York Stock Market] Decline Amid Uncertainty and Rising US Treasury Yields... Nasdaq Down 1.05%

Concerns Over Stagnation Ease... BOJ Also "Maintains Current Interest Rate"
Early Gains Reversed to Decline
US 10-Year Treasury Auction Weakness Drives Rate Increase
Volatile Market Expected to Persist for Now

The three major indices of the U.S. New York Stock Exchange fell on the 7th (local time) after rebounding the previous day. Concerns about an economic recession eased somewhat, and the Bank of Japan (BOJ) announced plans to halt interest rate hikes, leading to an early rise in the market. However, persistent uncertainties weighed on investor sentiment. The U.S. Treasury's 10-year bond auction failed to attract strong demand, causing bond yields to rise, which heavily burdened the stock market.

On that day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average closed at 38,763.45, down 234.21 points (0.6%) from the previous trading day. The large-cap-focused S&P 500 index fell 40.53 points (0.77%) to 5,199.5, and the tech-heavy Nasdaq index dropped 171.05 points (1.05%) to close at 16,195.81.

The New York stock market opened higher as concerns about a U.S. economic recession eased somewhat and the Bank of Japan (BOJ) announced plans to halt interest rate hikes in the event of financial instability. However, the market turned bearish in the afternoon after it was confirmed that demand for the U.S. Treasury's 10-year bond auction was weak. On that day, the U.S. Treasury offered $42 billion worth of 10-year U.S. Treasury bonds. However, due to weak demand, the auction yield was set at 3.96%, 0.03 percentage points higher than traders' initial expectations. The proportion of primary dealer bids, who absorb the remaining bonds, was 17.9%, higher than the recent average. A high proportion indicates weak demand for the bonds.

Following the weak U.S. Treasury auction news, bond yields rose, causing the stock market to decline. The 10-year U.S. Treasury yield, a global benchmark for bond yields, traded at 3.94%, up 6 basis points (1 bp = 0.01 percentage points) from the previous day. The 2-year U.S. Treasury yield, sensitive to monetary policy, remained at 3.99%, the same level as the previous day.

Charlie Ripley, Senior Investment Strategist at Allianz Investment Management, said, "There was some relief that the situation has somewhat calmed down over the past few days," but added, "There are still quite a few unknowns, including further unwinding of the yen carry trade and geopolitical headwinds."

Quincy Crosby, Global Chief Strategist at LPL Financial, said, "The remaining question is whether the concerns that pushed the market into a waterfall of selling have eased," adding, "Volatility is expected to continue during the calm seasonal period of August to September."

Currently, market fear has somewhat eased. Diagnoses continue that concerns about a U.S. economic recession are excessive, and the BOJ has announced it will maintain current interest rates for the time being. BOJ Deputy Governor Shinichi Uchida said, "We will not raise interest rates amid unstable financial markets," and "It is necessary to firmly continue financial easing at the current level for the time being." Among global investors, the yen carry trade?borrowing low-interest Japanese yen to invest in overseas assets?has been popular. However, after the BOJ raised the short-term policy rate from 0?0.1% to 0.25% on the 31st of last month, yen funds have been returning to Japan one after another. As the unwinding of the yen carry trade acted as a catalyst pulling down global stock markets, the BOJ directly intervened to calm market instability. Following Deputy Governor Uchida's remarks, the Japanese Nikkei 225 index rose 1.19% from the previous day, and the KOSPI index rose 1.83%.

However, market sentiment remains severely depressed, and uncertainties remain high, leading to analyses that volatility will continue for the time being even with minor negative factors. The risk of further unwinding of the yen carry trade also remains. According to JP Morgan, the scale of yen carry trade unwinding is about 50?60%.

By individual stocks, AI leader Nvidia fell 5.08%. Super Micro Computer and Airbnb plunged 20.14% and 13.38%, respectively, after reporting earnings below market expectations. Walt Disney fell 4.46% despite reporting quarterly earnings that exceeded expectations.

International oil prices rose on news of a decrease in U.S. crude oil inventories. West Texas Intermediate (WTI) crude oil closed at $75.23 per barrel, up $2.03 (2.77%) from the previous trading day, and Brent crude, the global oil price benchmark, closed at $78.33 per barrel, up $1.85 (2.42%).