Stock market: Wall Street weighed down by the Fed, the Dow Jones's biggest drop in 3 months

Stock market: Wall Street weighed down by the Fed, the Dow Jones’s biggest drop in 3 months

(Photo: Getty Images)

MARKET REVIEW. The New York Stock Exchange closed this Friday with sharp losses, prey to the promise of the president of the US central bank (Fed), Jerome Powell, to continue raising rates and to keep them at a lasting high level to calm inflation.

To (re)consult market news

Stock indices at closing

In Toronto, the S&P/TSX it fell 299.05 points (-1.48%) to 19,873.29 points.

In New York, the S&P500 it falls 141.46 points (-3.37%) to 4,057.66 points.

the nasdaq it fell 497.56 points (-3.94%) to 12,141.71 points.

the DOW closed down 1,008.38 points (-3.03%) to 32,283.40 points.

the loon fell US$0.0067 (-0.8697%) to US$0.7670.

the oil it rose $0.45 (+0.49%) to $92.97.

Prayed fell US$20.70 (-1.17%) to US$1,750.70.

the bitcoin it fell US$911.94 (-4.22%) to US$20,693.07.

The context

At the end of this dire session, the S&P 500 returned to its lowest closing level in a month.

Jerome Powell made clear this Friday his determination to continue the tightening cycle to stop the escalation of prices, to the point of carrying out a monetary policy “restrictive enough to bring inflation to 2%”, that is, voluntarily halt the economy.

The lawyer by training and former investment banker also indicated that this restrictive monetary policy, which corresponds to a high level of rates, should last “for some time”.

Returning to price stability will lead to “a long period of lower growth” as well as “a slowdown in the labor market,” hammered out the central banker, in the framework of the Jackson Hole (Wyoming) symposium, the High Mass Annual Central Central bankers

“Markets are not reacting this way because Chairman Powell’s speech was forceful, but because the last possibility of a repositioning” and short-term easing of monetary policy by the Fed has been ruled out, “explained Keith Buchanan. (from Global Investments).

After the highly anticipated departure of Jerome Powell, traders were mainly betting on another 0.75 percentage point hike in the Fed’s benchmark rate, which would be the third in a row, at its next meeting on September 21-22.

In the bond market, the yield on 3-month US Treasury bills, a maturity more sensitive to changes in monetary policy than the 10-year rate, reached its highest level in almost 14 years, at 2.82 %.

This rate shock has burned through technology stocks, which are highly dependent on credit conditions as they must find financing to fuel their growth.

Amazon (AMZN) (-4.76%), Alphabet (GOOG) (-5.44%), and even Apple (AAPL) (-3.77%) all stalled, as does the graphics card manufacturer Nvidia (NVDA) (-9.23%) and the software publisher Adobe (ADBE) (-5.67%).

The VIX index, which measures market volatility, jumped more than 17% on Friday.

The Fed’s continued offensive “radically decreases the likelihood of a soft landing” for the economy, said Cliff Hodge of Cornerstone Wealth, “and thus the chances of a bull scenario and new highs” in the stock market by the end of the year. of year.

However, “this does not necessarily mean that we are going to go down to the lows” of 2022, which date from mid-June, continued the analyst, who has “shaken markets, on tight margins”, for the coming months, and advocates take a “defensive stance” on stocks.

Jerome Powell’s authoritative message overshadowed the string of strong US indicators that had initially led the market, notably the slight pullback in US prices in July from the previous month, according to the published PCE index. on Friday.

The one-year inflation rate fell to 6.3% from 6.8% in June.

In another encouraging figure, the University of Michigan Consumer Confidence Index rose sharply in July, well above expectations. In addition, consumers have revised down their inflation forecasts for the horizons of one and five years.

On the coast, Electronic Arts (EA) gained height (+3.57% to US$132.17), driven by information from the Swedish media outlet GLHF, according to which Amazon is about to make a public takeover bid for the video game publisher.

The American conglomerate 3M (MMM) (-9.65% to $128.98) was hit hard by a federal judge’s decision in Indiana that the bankruptcy of its Aero Technologies subsidiary did not protect it from lawsuits related to earplugs intended for the military and accused of being defective.

Affected, like its German partner BioNTech, by a legal action of the biotech Modern (RNA) (-3.77%) for patent infringement, Pfizer (PFE) it fell 2.21% to $46.84. The case concerns patents related to so-called messenger RNA technology, which allowed the accelerated development of the first vaccines against Covid-19.

the computer manufacturer Dell Technologies (DELL) suffered (-13.53% to US$41.42) after the announcement of a quarterly turnover below expectations, along with cautious comments on the second half and a slowdown in demand.

The specialist in online installment payments Affirm (AFRM) unpinned (-21.33% to $24.57), the day after the post-trade release of a larger-than-expected loss and forecasts were seen as disappointing for its current fiscal year.

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