Mass Sell-off for Profit Taking... Nasdaq Falls 2.24% Amid Inflation Concerns [New York Stock Market]

Tesla Rises 3%
Concerns Arise Over Slower Pace of Interest Rate Cuts

All three major indices on the New York Stock Exchange plunged. The desire to realize profits from the recently leading 'Trump Trade,' uncertainty over the Federal Reserve's (Fed) policies, stronger-than-expected consumer data, and inflation concerns combined to weigh down stock prices.

On the 15th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 43,444.99, down 305.87 points (0.70%) from the previous session. The large-cap-focused S&P 500 index fell 78.55 points (1.32%) to 5,870.62, and the tech-heavy Nasdaq index plunged 427.53 points (2.24%) to close at 18,680.12.

All sectors except financials, real estate, and utilities declined. Consumer discretionary, healthcare and pharmaceuticals, and communication services all dropped more than 1%, while the technology sector plunged over 2%.

Among the giant tech companies, the so-called 'Magnificent 7 (M7),' only Tesla rose more than 3%, while all others fell. Amazon and Meta Platforms dropped over 4%, and Alphabet, Apple, and Microsoft declined around 2%. Nvidia fell 3.26%, barely holding onto its position as the largest market cap company. Nvidia was swept up in the market trend as semiconductor and artificial intelligence (AI) related stocks plunged in large numbers.

The Philadelphia Semiconductor Index plunged 3.42%, reflecting anxiety about the Trump administration. All 30 stocks comprising the Philadelphia index declined, with most stocks showing large drops including TSMC (-1.32%), Broadcom (-3.25%), ASML (-4.95%), AMD (-2.84%), and Qualcomm (-2.12%). Applied Materials plunged more than 9%.

Reuters Yonhap News

While Asian and European stock markets had been plunging recently, the three major U.S. stock indices had held up relatively well with only slight declines. However, as the desire to realize profits grew stronger and concerns about the Fed's uncertain policy path mixed in, the U.S. stock market also followed suit with a sharp decline. The policy uncertainty triggered by Fed Chair Jerome Powell the previous day appeared to continue its aftershocks on this day. Powell indicated that the current economic conditions show no need to rush a rate cut and suggested that the pace of rate cuts would be adjusted.

Fed officials also joined the cautious stance. Susan Collins, President of the Federal Reserve Bank of Boston, said in an interview with foreign media, "We will certainly not rule out the possibility of a rate cut in December," but added, "We are not on a predetermined path, so we need to carefully examine the data."

Austin Goolsbee, President of the Federal Reserve Bank of Chicago, also said in an interview with foreign media, "As long as inflation progresses toward the 2% target over the next 12 to 18 months, the policy rate will be lower than it is now," but added, "If there is no consensus on the neutral rate, it would be reasonable to start slowing the pace of rate cuts."

In particular, the news that U.S. consumer data released that day exceeded expectations strongly supported the view that the Fed's rate cut pace would slow. According to the U.S. Department of Commerce, retail sales in the U.S. last month increased by 0.4% month-over-month on a seasonally adjusted basis to $718.9 billion. The market had expected a 0.3% increase. This means that the U.S. economy and employment do not require aggressive rate cuts, weakening the Fed's rationale for lowering rates.

Meanwhile, as uncertainty over additional rate cuts in December increased, oil prices fell. On the same day at the New York Mercantile Exchange, the front-month December delivery West Texas Intermediate (WTI) crude oil closed at $67.02 per barrel, down $1.68 (2.45%) from the previous session. This was the lowest level in over two months since September 10, when it was $65.75.