The S&P 500 plunged 2% for the first two days in a row since the beginning of the pandemic… Growing fears of a recession
The Fed’s ‘big step’ and ‘giant step’ prospects are raised in the worst inflation in 40 years
The New York Stock Exchange collapsed on the news that US consumer prices soared the most in more than 40 years.
Expectations that the US central bank, the Federal Reserve (Fed) will raise interest rates more steeply, have weighed on the entire financial market due to longer-than-expected inflation.
On the 10th (local time), the Dow Jones Industrial Average of the New York Stock Exchange closed at 31,392.79, down 880.00 points (2.73%) from the previous day.
The Standard & Poor’s (S&P) 500 index plunged 116.96 points (2.91%) to 3,900.86, and the tech-focused Nasdaq Index plunged 414.20 points (3.52%) to close at 11,340.02, respectively.
According to Dow Jones Market Data, the S&P 500 index plunged more than 2% for two days in a row for the first time in more than two years since March 22-23, 2020, during the early stages of the novel coronavirus (COVID-19) outbreak.
The three major indexes of the New York Stock Exchange, which had often shown signs of rebound since the end of last month, turned downward again this week on expectations that inflation may have already peaked.
On a weekly basis, the Dow fell 4.6%, the S&P 500 fell 5.1%, and the Nasdaq fell 5.6%, CNBC reported.
The Dow had its 10th week of declines in the last 11 weeks.
The announcement that the US Consumer Price Index (CPI) in May soared 8.6% (compared to the same month of the previous year), the largest since December 1981, was released just before the market’s opening on the same day, cooling investor sentiment.
The CPI growth rate peaked at 8.5% in March, right after the Russian invasion of Ukraine, the highest in 40 years, then fell slightly to 8.3% in April, then turned back to a surprising rise that exceeded the market consensus.
“The figures confirm some of the fears investors have been talking about throughout the week,” said Rory Calvashina, head of US equity strategy at RBC Capital Markets, on CNBC.
Last month’s CPI figures also reinforced expectations that the Fed might push for a more hawkish (preferring tightening) monetary policy to keep inflation down.
Following May, the Fed, which predicted three consecutive ‘big steps’ (0.5 percentage point rate hike at a time) from May to June and July, is raising hopeful observations that it may take a break from raising interest rates for a while in September. However, with this CPI figure suggesting prolonged inflation, the possibility of continuing the big step after September has rather increased.
In particular, markets are raising their heads little by little, even predicting that the Fed could take the ‘giant step’ of raising the key interest rate by 0.75 percentage points at a time at the Federal Open Market Committee (FOMC) regular meeting to be held next week in June.
The Fed has never raised interest rates this sharply since 1994.
As a result, the yield on the two-year U.S. Treasury bond, which is the most sensitive to the benchmark interest rate trend, broke through the 3% level in just one day from 2.815% the previous day, rising to the highest level since 2008.
As a result, tech stocks feeling a burden on interest rates fell all at once.
Nvidia plunged 6.0%, Amazon 5.6%, and Microsoft (MS) plunged 4.5%, respectively, and even the “biggest” Apple fell 3.9%.
In addition, concerns about the possibility of a decrease in consumer spending due to a surge in inflation in the future and a rapid rate hike by the Fed could lead to an economic recession also acted as a negative factor for the stock market.
In fact, the preliminary data of the University of Michigan’s Consumer Sentiment Index for June, released on the same day, reached an all-time low.
As a result, not only tech stocks, but also banking stocks, economically sensitive stocks, and consumer stocks all fell.
Wells Fargo and Boeing plunged 6.1% and 5.1%, respectively.
/yunhap news