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(Seoul=Yonhap Infomax) International Economics Department = On the 13th (U.S. Eastern Time), all three major U.S. stock indices closed sharply lower in the New York financial markets.
Although the U.S. federal government shutdown was lifted, the equity market displayed a classic "buy the rumor, sell the news" pattern.
With the shutdown risk removed, market participants shifted their focus back to concerns over an artificial intelligence (AI) bubble and the trajectory of interest rate cuts, responding with broad-based selling.
U.S. Treasury prices declined, with long-dated bonds underperforming and the yield curve steepening (bear steepening).
The end of the federal government shutdown brought renewed uncertainty over the Federal Reserve's policy rate path. Hawkish comments from several regional Fed presidents weighed on rate cut expectations, while a weak 30-year bond auction added further pressure.
The U.S. dollar weakened.
The dollar index (DXY), which measures the greenback against six major currencies, tumbled to the low 99 range as uncertainty grew amid a lack of economic data.
The dollar faced downward pressure, reflecting confusion over the absence of key economic indicators.
New York oil prices rebounded after a sharp drop the previous day, though gains were capped by news of a significant increase in U.S. crude inventories.
According to CME FedWatch, as of 15:42 in New York, the federal funds rate (FFR) futures market priced in a 51.6% probability of a 25bp rate cut by the Fed in December, down sharply from 62.9% in the previous session.
The probability of a rate hold jumped from 37.1% to 48.4%.
Equity Markets
All three major U.S. stock indices ended the session with steep losses.
Despite the lifting of the federal government shutdown, equities followed a "buy the rumor, sell the news" dynamic.
With the shutdown no longer a market driver, participants turned their attention back to the AI bubble debate and the outlook for rate cuts, prompting a wave of selling.
On the 13th (U.S. Eastern Time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed down 797.60 points (1.65%) at 47,457.22.
The S&P 500 fell 113.43 points (1.66%) to 6,737.49, while the Nasdaq Composite plunged 536.10 points (2.29%) to 22,870.36.
President Donald Trump signed a temporary budget bill overnight, officially ending the record 43-day shutdown. With the shutdown over, a backlog of delayed economic indicators is expected to be released starting next week.
Last Friday afternoon, news that some Democratic senators had agreed to a temporary budget deal to end the shutdown sparked a sharp rebound in stock indices. Optimism over the shutdown resolution was quickly priced in through Monday.
Today's sell-off reflected both the disappearance of the shutdown catalyst and caution ahead of the next market driver. Key economic data, delayed during the shutdown, remains a source of uncertainty, while a series of hawkish Fed comments have dampened expectations for rate cuts.
Jose Torres, economist at Interactive Brokers, said, "The government reopening has become a 'buy the rumor, sell the news' event," adding, "Investors are refocusing on the Fed's hawkish rhetoric and concerns over tech sector overvaluation."
According to CME FedWatch, the federal funds rate futures market now reflects a 48.1% probability of a rate hold in December, with intraday readings above 50%, signaling a shift away from optimism over rate cuts.
Hawkish Fed commentary accumulated during the shutdown appears to have been priced in all at once.
Beth Hammack, President of the Cleveland Fed and considered a hawk, said, "At this point, I don't see a high probability that the labor market is entering a recession," and "I don't think monetary policy can do much more for the job market at this stage."
Alberto Musalem, President of the St. Louis Fed, commented, "We need to proceed very cautiously," noting that "there is limited room for further easing without making monetary policy overly accommodative."
Neel Kashkari, President of the Minneapolis Fed, emphasized, "Inflation remains too high at around 3%."
The AI bubble narrative is now becoming a long-term theme. Amid the sell-off, the Philadelphia Semiconductor Index (SOX), composed of AI and semiconductor-related stocks, plunged 3.72%.
Market leader Nvidia fell 3.58%, while Broadcom, AMD, Intel, Arm, and Lam Research all posted declines of around 5%. All 30 components of the SOX ended lower.
Skepticism over AI valuations was starkly reflected in Oracle's share price. After surging 36% in a single day to $345 in September on news of a major OpenAI contract, Oracle shares fell another 4.15% today to $217.57. The contract with OpenAI has yet to significantly impact revenue, and concerns over large-scale debt-funded capital expenditures have pushed Oracle shares below pre-surge levels.
By sector, all groups except energy declined. Technology and consumer discretionary fell more than 2%, while industrials, financials, communication services, utilities, and real estate all dropped over 1%.
Among mega-cap tech stocks with market capitalizations above $1 trillion, all except Meta closed lower. Tesla tumbled 6.64%, while Alphabet and Amazon each lost more than 2%.
Blue-chip stocks, which had recently outperformed tech, also weakened today.
Entertainment giant Walt Disney fell 7.75% after mixed Q3 results.
Financials also dragged down the Dow, with Goldman Sachs down 3.99% and JPMorgan Chase off 3.41%.
The CBOE Volatility Index (VIX) jumped 2.49 points (14.22%) to 20.00.
Bond Markets
U.S. Treasury prices fell, led by long-dated maturities, steepening the yield curve (bear steepening).
The end of the federal government shutdown revived uncertainty over the Fed's policy rate path. Hawkish comments from regional Fed presidents and a weak 30-year auction added to the bearish tone.
According to Yonhap Infomax's overseas rates screen (screen no. 6532), as of 15:00 (U.S. Eastern Time) on the 13th, the 10-year Treasury yield was 4.1110%, up 4.50bp from the previous day's 15:00 level.
The 2-year yield, sensitive to monetary policy, rose 2.30bp to 3.5890% over the same period.
The 30-year yield, the longest maturity, climbed 4.10bp to 4.7020%.
The 10-2 year yield spread widened from 50.00bp to 52.20bp.
Bond yields and prices move inversely.
Following the shutdown resolution, Treasury yields rose during European trading and extended gains in New York as bets on a rate hold next month increased.
Mary Daly, President of the San Francisco Fed and typically dovish, said at an event in Dublin, Ireland, "It's too early to say there will be no cuts or that cuts are certain," describing her policy stance as "neutral."
"There are about four weeks until the next meeting, and a lot of information will come out by then," she said, explaining her open-mindedness.
Beth Hammack, President of the Cleveland Fed, reiterated her opposition to further rate cuts in an interview with MarketWatch, saying, "At this point, I don't see a high probability that the labor market is entering a recession," and "I don't think monetary policy can do much more at this stage."
Earlier, Susan Collins, President of the Boston Fed, said in a speech after the New York market closed, "In such a highly uncertain environment, it seems appropriate to keep the policy rate at its current level for some time to balance inflation and employment risks."
There was heightened caution over how official economic indicators, delayed during the shutdown, would turn out.
Kevin Hassett, Chairman of the White House National Economic Council (NEC), told Fox News that the household survey, which produces the unemployment rate, would not be conducted for the October jobs report.
George Cipolloni, portfolio manager at Penn Mutual Asset Management, said, "The labor market is definitely showing weakness, but there is not enough relief on the inflation front," adding, "The Fed is in a kind of stalemate." He noted, "It would be surprising if the Fed doesn't cut rates by at least 25bp one more time, but the biggest issue remains the lack of a solution for inflation and costs."
By midday in New York, the implied rate cut for next month in the futures market had narrowed to just under 12bp, with the probability of a rate hold slightly surpassing that of a 25bp cut.
The 30-year auction held in the afternoon saw weak demand. The 30-year yield broke above 4.70% after the results, marking an intraday high.
According to the U.S. Treasury, the new $25 billion 30-year bond was awarded at a yield of 4.694%, 4.0bp lower than last month's 4.734% auction.
The bid-to-cover ratio fell to 2.29 from 2.38 in the previous auction, the lowest since August and below the six-auction average of 2.38.
The awarded yield was 1.0bp above the when-issued yield, indicating weaker-than-expected demand.
According to CME FedWatch, as of 15:42 in New York, the FFR futures market priced in a 51.6% probability of a 25bp rate cut by the Fed in December, down sharply from 62.9% in the previous session.
The probability of a rate hold jumped from 37.1% to 48.4%.
Foreign Exchange Markets
The U.S. dollar weakened.
The dollar index (DXY), which tracks the greenback against six major currencies, slid to the low 99 range amid heightened uncertainty due to a lack of economic data, briefly dipping below 99.
According to Yonhap Infomax (screen no. 6411), as of 16:00 on the 13th (U.S. Eastern Time) in the New York FX market, the dollar-yen rate was 154.542 yen, down 0.206 yen (0.133%) from the previous New York close of 154.748 yen.
The euro-dollar rate rose 0.00434 (0.374%) to 1.16331.
The dollar index fell 0.306 points (0.308%) to 99.181.
The dollar came under pressure in New York trading, reflecting confusion over the absence of economic indicators.
Kevin Hassett, Chairman of the White House NEC, told Fox News, "Because the household survey was not conducted in October, we will only get half of the jobs report—we'll get the employment component but not the unemployment rate," adding, "We probably won't know what the October unemployment rate was."
The lack of key economic data due to the shutdown has heightened uncertainty over the Fed's policy rate path.
According to CME FedWatch, as of 15:47 in New York, the FFR futures market priced in a 51.9% probability of a 25bp rate cut by the Fed in December, down more than 10 percentage points from 62.9% in the previous session.
The odds have retreated to nearly a "50-50" coin toss.
U.S. assets—including the dollar, Treasuries, and equities—fell across the board, reflecting heightened uncertainty. The dollar index fell as low as 98.989 intraday.
Juan Perez, trading director at Monex USA, said, "The shutdown is over, but how quickly will we return to normal, how soon will we get the data, and when will we be able to make accurate analyses based on reliable U.S. statistics for September and October? All of this remains uncertain."
Seema Shah, chief global strategist at Principal Asset Management, said, "In an environment with limited information and several conflicting trends that could develop in risky directions, portfolio flexibility is more important than bold conviction."
The pound-dollar rate rose 0.00553 (0.421%) to 1.31856.
According to the UK Office for National Statistics (ONS), UK GDP grew 0.1% quarter-on-quarter in Q3 (July–September), slowing from 0.3% in Q2 and missing market expectations of 0.2%.
The pound weakened immediately after the GDP release but rebounded alongside the weaker dollar.
Scott Gardner, investment strategist at JPMorgan Personal Investing, said, "Another weak GDP print is fueling debate over what policy levers the prime minister can pull to stimulate growth."
The offshore dollar-yuan (CNH) rate fell 0.0142 (0.200%) to 7.0980.
Oil Markets
New York oil prices rebounded after a sharp drop the previous day, though gains were limited by news of a large increase in U.S. crude inventories.
On the 13th (U.S. Eastern Time) at the New York Mercantile Exchange, December West Texas Intermediate (WTI) crude settled at $58.69 per barrel, up $0.20 (0.34%) from the previous session. The closing price remained below $60 for a second consecutive day.
WTI had plunged 4.18% the previous day after OPEC revised its outlook to a slight supply surplus in the global oil market next year. The previous day's drop was the steepest since October 10 (-4.24%).
Subro Sarkar, head of energy research at DBS, said, "The recent weakness is due to OPEC's revision of the 2026 supply-demand balance in its monthly report," but added, "There is significant support for oil prices near $60 per barrel, especially considering that tighter U.S. sanctions on Russia could disrupt Russian exports in the short term."
WTI rose more than 1% intraday, briefly topping $59, but pared gains after the release of U.S. weekly crude inventory data.
According to the U.S. Energy Information Administration (EIA), U.S. crude inventories for the week ended the 7th rose by 6.413 million barrels, far exceeding analysts' expectations for a 2 million barrel increase.
U.S. crude inventories have now risen for two consecutive weeks, with last week's increase the largest since the fourth week of July.
Gasoline inventories fell by 945,000 barrels, less than the market forecast for a 1.9 million barrel decline.
Gasoline inventories have now fallen for five straight weeks, though the pace of decline slowed sharply from the previous week's 4.729 million barrel drop.
kphong@yna.co.kr
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Bond market prices in this article are as of 15:00 local time and may differ from closing prices. For official New York bond market closing prices, refer to the '[US Treasury Yield Electronic Closing Prices]' article released at 07:30 AM.
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