[New York Stock Market] Fed's First Rate Hold Leads to Broad Decline... Treasury Yields Remain Stable

Fed Holds Rates Steady at 4.25-4.5% Despite Trump Pressure
Powell: "Rates Less Restrictive... No Need to Rush"
Second Trump Administration Expected to Tighten Semiconductor Export Controls to China

The three major indices of the U.S. New York stock market all fell on the 29th (local time). Investor sentiment weakened as the Federal Reserve (Fed) halted the monetary easing cycle that began in September last year, as previously announced.

On that day in the New York stock market, the Dow Jones Industrial Average (Dow), which focuses on blue-chip stocks, closed at 44,713.52, down 136.83 points (0.31%) from the previous trading day. The S&P 500, centered on large-cap stocks, fell 28.39 points (0.47%) to 6,039.31, and the Nasdaq, focused on technology stocks, dropped 101.26 points (0.51%) to 19,632.32.

The market paid close attention to the Fed's decision on the benchmark interest rate that day. At the first Federal Open Market Committee (FOMC) regular meeting of the year, the Fed unanimously decided to keep the federal funds rate unchanged at 4.25-4.5%. This is the first pause after three consecutive rate cuts, which began with a 0.5 percentage point cut from 5.25-5.5% in September last year, followed by two additional 0.25 percentage point cuts in November and December, marking the start of monetary easing after two and a half years.

Fed Chair Jerome Powell said at a press conference held immediately after the FOMC meeting that the current benchmark interest rate is "considerably less restrictive" and that "policy and the economy are in a really good place, so there is no need to rush adjustments (to monetary policy)." Regarding former President Donald Trump's public calls for rate cuts on the 23rd, Powell said commenting on it was "inappropriate" and that he had "not been in contact with the President." However, he indicated the Fed's commitment to maintaining the independence of monetary policy by stating, "The public should be confident that the Fed will continue to do its job." When asked about the potential impact of Trump's policies on the economy, Powell replied, "Policies need to be clarified," adding, "There are too many variables related to policy, so we need to wait and watch."

The stock market widened its losses immediately after the somewhat hawkish (favoring monetary tightening) FOMC policy statement was released that day. The statement added the phrase that the labor market "remains solid," and removed the previous phrase that inflation had "made progress toward the 2% target." However, after Powell's press conference, the market trimmed its losses. Powell explained that the removal of the inflation phrase was not an intentional policy signal but simply a wording adjustment, which eased some market concerns.

Earlier, former President Trump, who had publicly pressured the Fed for rate cuts, criticized Powell immediately after the Fed's rate hold, accusing him of "failing to stop the inflation problem."

David Russell, Chief Global Market Strategist at TradeStation, said, "The statement was somewhat hawkish, but policymakers are taking a long break until the March meeting and are holding off (on policy changes). Today's meeting was not much of an event for Fed watchers."

Lindsey Rossner, Senior Multi-Sector Bond Manager at Goldman Sachs Asset Management, analyzed, "With the Fed pressing the pause button, the new year’s monetary easing cycle has entered a new phase. We believe the easing cycle is not over yet, but the Fed will want to see further progress in inflation indicators before the next rate cut."

The outlook for the Trump administration’s second term to strengthen export controls on semiconductors to China also pressured investor sentiment. On that day, Howard Lutnick, nominee for Secretary of Commerce, testified at a Senate confirmation hearing, stating, "China has bought a tremendous amount of Nvidia semiconductors and found ways to circumvent (export controls). We need to encourage our innovation and stop helping China."

By individual stocks, technology shares declined. Nvidia fell 4.1%. Broadcom dropped 0.49%. Tesla, which announced earnings after the market close, fell 2.26% during regular trading hours. Microsoft (MS) declined 1.09%, while Meta rose 0.32%.

U.S. Treasury yields were mixed within a narrow range. The 10-year U.S. Treasury yield, a global bond yield benchmark, fell 1 basis point (1 bp = 0.01 percentage point) to 4.53%, while the 2-year U.S. Treasury yield, sensitive to monetary policy, rose 1 bp to 4.22%.

International oil prices closed lower. West Texas Intermediate (WTI) crude oil fell $1.15 (1.6%) to $72.62 per barrel, marking the lowest level this year. Brent crude, the global oil price benchmark, closed at $76.58 per barrel, down $0.91 (1.2%) from the previous day.