New York (AFP) – The New York Stock Exchange fell sharply on Thursday, gloomy over the idea of the US Federal Reserve (Fed) continuing to aggressively raise interest rates, and after announcing a series of bad indicators.
Around 14:00 GMT, the Dow Jones gave 2.17%, the Nasdaq index, with a strong technological composition, 3.30%, and the broader S&P 500 index, 2.72%.
On Wednesday, Wall Street jumped after the Fed’s announcement that it had increased its key rate by 0.75 percentage points, the first since 1994.
More than this increase, which has already integrated the New York market, operators were pleased with a statement by Fed President Jerome Powell, who indicated that such increases would not become “commonplace”.
However, the official insisted that the institution’s priority now remains the fight against inflation and that preparations are being made for new pronounced rate increases.
“The only possibility the markets see is that the Fed will change direction or slow down interest rates, and since neither seems to be coming, there’s no reason to get excited about anything,” said Gregory Volokhine, of Meeschaert Financial Services.
“For 20 years we have had: the Fed in saving the market. Today it is: the Fed against the market,” he continued.
After easing on Wednesday, the bond market also came into its own and retained prospects for future interest rate hikes. The yield on 10-year US government bonds was 3.41%, compared to 3.39% the day before.
“There is stagflation in the air,” Patrick O’Hare of Briefing.com wrote in a note, a combination of low growth and high inflation, “and it’s not good for financial assets.”
Markets are “burdened by fears of recession, worsening investor sentiment and less liquidity because buyers are on the sidelines,” the analyst said.
This sense of economic slowdown on Thursday was prompted by a series of indicators, most notably the Philadelphia manufacturing activity index, which showed a decline (-3.3 points) in June, while economists expected growth (+4.8 points).
Another cloud obscuring the horizon of the U.S. economy, the gradual rise in unemployment, illustrated by higher-than-expected weekly registrations (229,000). For Peter Boockvar, of the Bleakley Advisory Group, “an increasing number of layoffs are watching us, the question is to know what the pace will be.”
The last negative signal, the decline in housing stock begins in the United States, which was below expectations.
“This morning’s data has done nothing to allay fears of an economic slowdown or alleviate concerns that the Fed will raise rates amid a slowdown (economy) to bring inflation under control,” Patrick O’Hare said.
“There will be rates that will continue to grow in an economy that continues to decline, and that is poison,” Gregory Volokhine added. “The market can’t go up” in this configuration.
On the list, Apple continued to fall (-3.32% to $ 130.93) and threatened to fall below the symbolic threshold of $ 2,000 billion in capitalization. Since its peak in early January, Apple has wiped out more than $ 800 billion in valuation.
As for Netflix (-4.11% to $ 172.71), it flirted with the lowest capitalization in almost 5 years.
The quotation of the Revlon cosmetic group was suspended after the announcement of the bankruptcy on Wednesday, which should enable its restructuring. The company had difficulties with the pandemic, which led to a slowdown in spending on some cosmetic products.
Twitter advanced (-0.76% to $ 38.28) while Elon Musk must address company employees on Thursday. According to the Wall Street Journal, he should reiterate his intention to take over the social network. Tesla, on the other hand, led by an entrepreneur, looked gray (-6.20% to $ 655.65).
The energy sector has followed the slowdown in oil prices, such as ExxonMobil (-3.30%) or Phillips 66 (-3.58%). Current has spread to all raw materials, affecting mining Freeport McMoRan (-4.57%) or steel Cleveland-Cliffs (-5.65%).
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