Wall Road falls sharply VAT Information

The New York Stock Exchange ended abruptly on Monday, fearing that inflation will force the US Federal Reserve (Fed) to tighten the screw even more as a slowdown or even a recession looms on the horizon.

• Read also: Rising rates and mortgages: when should you worry?

• Read also: Almost 20% of homeowners are unable to repay their mortgages

• Read also: Growing mortgages: Girard is not afraid of recession

The Dow Jones lost 2.79% to 30,517.06 points, the Nasdaq technology-affected index fell 4.68% to 10,809.22 points, while the broader S&P 500 index fell 3.87% to 3,749.91 points.

The S&P 500, considered the most representative Wall Street index, entered the “bear market,” meaning it lost more than 20% of its all-time high in early January (-22% at Monday’s close).

As early as Friday, the New York market was further shaken on Monday, still worried about the CPI price index, which showed that inflation in the United States accelerated again in May, while many expected a slowdown to begin.

“Friday is likely to be a crucial moment for markets,” commented Angelo Kourkafas of Edward Jones. “The central thesis (of the investor) has been annulled”, which shows that inflation has not yet reached its peak.

Accordingly, operators have revised their monetary policy projections and now estimate that there is an almost 80% probability that the Federal Reserve will increase its rates by at least 1.75 percentage points by the end of September, ie two increases of half a point and another 0.75 points.

Such a sharp rise would be the first since 1994.

“We expect the Fed to surprise markets by raising rates by 0.75 percentage points as early as June to strengthen their credibility and restore an advantage over inflationary pressures,” analysts wrote in a note. Barclays, on the occasion of the Fed meeting to be held Tuesday and Wednesday.

This revision of expectations “contributed not only to the volatility of the bonds, but also to the shares,” Angelo Kourkafas explained.

“The fact that rising winds (for the economy) as the Fed is forced to increase rates at a faster pace has caused indigestion in the markets,” he said.

“Wall Street is facing a lot of bad news,” commented Edward Moya of Oanda, “but the problem is that until we see deteriorating credit conditions and market functioning, the Fed has the green light to tighten as much as possible and reduce inflation controls.” .

Overall, investors show a “lack of confidence in estimates, knowing that earnings warnings remain few despite expectations of much slower growth or even a recession in the coming months,” says Edward Moya.

Listen to Alexandre Moranville-Ouellet on the Mario Dumont microphone on QUB radio:

The prospect of rising interest rates has also pushed the bond market, which has suffered a massive pullback. Yields on 10-year U.S. government bonds, which are moving in the opposite direction from their price, jumped 3.38%, the first time in more than 11 years.

The yield curve, which links all bond maturities between short and long interest rates, was dislocated on Monday, with yields on two-year U.S. Treasury bonds even briefly above the 10-year mark, a sign sometimes interpreted as before. recession.

For Angelo Kourkafas, the New York market shows no signs of capitulation, a term used to mean that the sales trend is no longer in opposition and that the market is approaching the threshold.

Many believe the VIX index, which measures market volatility, although it jumped nearly 25% on Monday, is still a good distance from levels historically corresponding to a market near the bottom.

The stock market has very rarely escaped the wave that has taken everything in its path, with particular fervor towards technology, especially cryptocurrencies and the travel industry.

Among the most endangered are Amazon (-5.45%), Tesla (-7.10%) and Meta (-6.44%). Since its record level in early September 2021, the social network has lost 57% of its market capitalization.

In a climate of general risk aversion, anything directly or indirectly related to cryptocurrencies has been avoided like the plague, as evidenced by the performance of the Coinbase platform (-11.41%) or bitcoin mining specialist Riot Blockhain (-10, 06%).

As the summer season approaches, cruise passengers have suffered from fears of economic slowdown, such as Norwegian (-12.23%) or Royal Caribbean (-9.74%). After them, airlines flew very low, from American Airlines (-9.45%) to United Airlines (-10.06%).

Leave a Comment