New York stocks fell sharply on concerns that the U.S. Federal Reserve's aggressive rate hike could plunge the economy into a recession. The Dow collapsed at the 30,000-point level for the first time since January 2021.
The Dow closed at 29,927.07, down 741.46 points or 2.42 percent from the previous day. The S&P 500 index closed at 3666.77, down 123.22 points (3.25%). The NASDAQ index fell 453.06 points (4.08%) to 16,646.10, the lowest level since September 2020.
The S&P 500 index and the NASDAQ index have entered a bear market, falling about 24% and 34% from their high points in January and November, respectively. Dow Ji-soon is down 19% from the record high recorded on January 5.
Interest rates on 10-year government bonds have fallen. The 10-year yield, which started at 3.289 percent on the same day, fell to 3.247 percent.
The Dow's 30,000-point collapse...Wall Street's 'Critical Psychological Defense Line' Fears Collapse
Wall Street is concerned about the collapse of the Dow's 30,000-point level. The Dow touched the 30,000-point level for the first time in November 2020 thanks to large-scale monetary and fiscal stimulus policies. Market Watch reported that the 30,000-point Dow is not particularly meaningful for technical analysis, but many Wall Street investors see around 1,000 points around it as an important psychological level of the market.
Economic figures released on the same day also hinted at the possibility of a sharp slowdown in economic activity. The number of housing starts dropped by 14% in May, well below the market forecast (-2.6% by Dow Jones).
Wall Street: "The slowdown is inevitable, the Fed has already lost confidence."
"Investor sentiment seems to be able to focus on only one thing at a time," said Susan Schmidt of Aviva Investors. "The stock market rose yesterday as the Fed announced a rate hike as people expected, and now investors recognize that the reaction is an economic slowdown."
"Investors and the market have lost confidence in the Fed overall," said Ryan Dietrick, chief market strategist at LPL Financial. "Looking back, the Fed should have been more aggressive, raising interest rates from the end of last year, and the market now knows this."
Mohamed El-Erian, chief investment adviser at Allianz, told CNBC, "Central banks around the world are 'waking up' as they fight inflation," adding, "Now we have to leave the artificial world with massive liquidity injected, and the road will be rough."
"The market now expects austerity to occur more actively than the Fed suggests," said Ross Mayfield, an investment strategy analyst at Baird Private Wells Management. "A higher interest rate means the U.S. economy will cool down more, so a recession is more likely in the next few years."
International oil prices have risen. On the New York Mercantile Exchange (NYMEX), the July delivery of WTI (Western Texas crude oil) rose $1.75 (1.52 percent) to $117.06 per barrel. On the London ICE Futures Exchange, North Sea Brent crude, the benchmark for international oil prices, rose $0.39 (0.33%) to $118.90 per barrel as of 10:23 p.m.
Gold prices rose. On the New York Mercantile Exchange, the price of August delivery rose 40.10 dollars (2.20 percent) to 1,859.70 dollars per ounce from the previous trading day.
The dollar is weak. As of 5:24 p.m., the dollar index (DXY) in the New York foreign exchange market is recording 103.82, down 1.27% from the previous day.
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