US Treasury Yields Surge on Credit Downgrade; New York Stock Market Opens Lower

Korea Economic Daily

Summary

It was reported that the New York stock market opened lower due to the surge in Treasury yields following the US credit rating downgrade.
It was noted that tech stocks like Palantir, Tesla, and Nvidia fell sharply due to rising interest rates.
Moody's credit rating downgrade mentioned the impact of the federal government's budget deficit increase and debt rollover.

Nvidia, Tesla, Palantir and Other Tech Stocks Plunge

Dollar Weakens, Gold Prices Rebound After Last Week's Decline

The New York stock market started with a sharp decline on the 19th (local time) due to the surge in Treasury yields following the US credit rating downgrade, but the decline is narrowing.

As of 10 a.m. Eastern Standard Time, the S&P 500 fell 0.4%, and the Nasdaq Composite Index dropped 0.6%. The Dow Jones Industrial Average decreased by 0.1%.

The credit rating downgrade has spurred a plunge in bond prices. The yield on the 30-year US Treasury bond surpassed 5% early in the morning Eastern Standard Time. By 10 a.m., it had surged 10 basis points (1bp=0.01%) to 5.005% from the previous session. The 10-year Treasury yield rose 9bp to 4.529%.

The US fiscal deficit has exceeded 6% of the Gross Domestic Product (GDP) over the past two years. This is an unusually high level except during recessions or world wars.

The Bloomberg Dollar Index fell 0.6%, declining against most major currencies. Spot gold prices, which had been declining last week, rose 0.8% to trade at $3,230.84 per troy ounce on this day.

In the stock market, tech stocks, which are most affected when investors' preference for risky assets decreases due to rising interest rates, fell sharply.

Palantir fell 3%, and Tesla plunged 4%. Nvidia and Apple also fell 2%.

On the 16th, credit rating agency Moody's downgraded the US national credit rating from Aaa to Aa1, aligning it with other credit rating agencies. Moody's cited the impact of the federal government's budget deficit increase and debt rollover due to high borrowing rates.

Peter Boockvar, Chief Investment Officer (CIO) of Bleakley Financial Group, commented on the US credit rating downgrade, saying, "The unchanging fundamental issue of declining foreign demand and continued debt increase is serious."

Today's stock market decline comes after last week's significant rise when investors cheered the temporary tariff reduction agreement between the US and China. The tech-heavy Nasdaq Composite Index surged over 7% last week, leading the upward trend. The S&P 500 Index also rose for five consecutive days, surging over 5%.

Bitcoin traded down 1% at $103,022.57. Ether rose 1.5% to reach $2,431.05.

Guest reporter Kim Jung-ah kja@hankyung.com

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