(Boursier.com) – After an initial positive reaction to the Fed’s interest rate hike on Wednesday, the New York Stock Exchange fell sharply on Thursday as investors feared a rapid tightening of monetary policy could trigger a recession. The other two central banks, the Bank of England and the Swiss National Bank, raised their key rates on Thursday to fight inflation. These monetary policy adjustments lead to high volatility in stock markets, but also in currencies and rates. Energy markets are worried about the reduction of Russian gas supplies to the European Union.
Two hours before closing, Dow Jones relapse 2.5% to 29,905 points, while the index is broad S & P500 lost 3.4% to 3,660 points and Nasdaq Composite, rich in technology and biotech stocks, fell 4.3% to 10,621 points. Technological stocks, “Gafam” (Alphabet, Apple, Meta Platforms, Amazon, Microsoft) all lose at least 3%, while You are here a drop of 9.8%, AMD loses 9.2% and Netflix 3.7%.
Oil is recovering, a barrel of American light crude oil WTI (July futures contract) recovered 1.43% to $ 116.78 on Nymex, while Brent The North Sea in August regained 1.3% to $ 120.03 on the ICE. gold returned in favor of safe investors, jumping 1.7% to $ 1,849.90 an ounce on the Comex (August futures).
High currency volatility after adjusting monetary policy
In foreign exchange markets, dollar index lost 1.6% to 103.63 points against a basket of currencies, while Swiss franc jumped 3% against the dollar and 1.8% against the euro, after a sudden increase in the SNB rate of 50 basis points. euro it recovered 1.2% to $ 1.0572 against the dollar. the bitcoin trying to maintain a $ 21,000 threshold after a recent purge. The pound sterling it rose 1.4% against the dollar and 0.2% against the euro.
For its part, the Bank of England raised its key rate by a quarter of a point on Thursday to bring it to 1.25%, the fifth increase since December. It should be noted that some observers were counting on a significant contraction, of 50 bp, in relation to the inflation that reached 9% in Great Britain in April, and in a few months it should exceed 11%, according to BoE experts.
In bond markets, yields remain high on both sides of the Atlantic. Execution T-Bond is 10 years old it appears on Thursday night at 3.33% (+4 basis points), and in “2 years” it dropped to 3.17% (-2 bp). Execution A 10-year German package climbed 7 bps to 1.71% while the rate British gilded of the same maturity was 5 bp at 2.51%.
The Fed is ready to increase rates to 3.8% in relation to inflation
The US Federal Reserve therefore accelerated its pace on Wednesday night, raising its main key rate by three quarters of a point (75 basis points) to bring it between 1.50% and 1.75%, the first increase of its kind since 1994. . years. , Fed President Jerome Powell said during his press conference that he did not rule out a further increase of 75 basis points at the next meeting on July 26 and 27. “From the perspective of where we are today, it seems that we will increase by 50 or 75 bp at our next meeting,” he said, noting that the size of the increase will depend on economic indicators.
According to new economic projections released by the Fed on Wednesday, the average forecast of FOMC members for the rate of “fed funds” rose sharply, to 3.4% at the end of the year, compared to 1.9% projected in the latest projections made in March. . The FOMC then sees rates continue to rise to reach 3.8% at the end of 2023 (compared to 2.8% expected in March) before returning to 3.4% in 2024 (2.8% expected in March).
Under the ongoing monetary tightening, the Fed expects inflation to reach 5.2% this year (PCE index), before falling to return to 2.6% at the end of 2023 and then to 2.2 % at the end of 2024, approaching the long Fed -term 2% target.
The Fed now forecasts U.S. GDP growth of just 1.7% this year from 2.8% compared to 2.8% expected in March, and after a strong recovery after the 5.7% pandemic in 2021. Growth would continue should be 1.7% in 2023 (compared to 2.2% expected in March) then 1.9% in 2024 (2% expected in March). However, Jerome Powell said Wednesday he did not notice a general slowdown in the U.S. economy and assured that the Fed was “not trying to push the economy into recession.” “We are trying to lower inflation to 2% (and keep) a strong labor market,” he explained. “That’s what we’re trying to do,” he insisted.
Macroeconomic indicators are beginning to decline in the United States
Markets, however, seem to doubt the Fed’s ability to conduct a soft landing for the economy. U.S. markets learned of several disturbing statistics on Thursday. The start of housing care in May 2022 was thus much lower than expected at 1.549 million units, compared to the 1.72 million market consensus and after 1.81 million in April. There were 1.695 million building permits, compared to 1.8 million by consensus and 1.82 million in April.
Moreover, the Philadelphia Fed’s production index for the month of June was negative at -3.3, compared to the FactSet consensus of +5, which indicates a contraction in activities in the region.
Unemployment claims for the week ended June 11 were more than expected, at 229,000, compared to 218,000 consensus after 232,000 the previous week.
Consumption on Wednesday showed signs of weakness in the United States, with retail declining by 0.3% in May over one month, compared to the FactSet consensus of + 0.2% and following an increase of 0.7% in April. Excluding cars, retail sales continued to grow by 0.5%, up from 0.7% by consensus and + 0.4% in April. But without cars and gasoline, finally, U.S. spending rose just 0.1%, up from 0.5% market consensus and 0.8% a month earlier.
VALUES TO BE MONITORED
Jabil (-10%), the US electronics subcontractor, announced for its third fiscal quarter ended in late May 2022, results that exceeded expectations, raising its financial forecasts. For the quarter ended, net income was $ 218 million and $ 1.52 per share, compared to $ 169 million a year earlier. Adjusted earnings per share reached $ 1.72, compared to a consensus of $ 1.62. Revenue rose 15% to $ 8.33 billion, compared to the FactSet consensus of $ 8.22 billion. “As we look to the future, we see strong demand in key areas of our business,” said Group CEO Mark Mondello. “Given this continued momentum, we now expect revenue in fiscal 2022 to approach $ 32.8 billion and adjusted earnings per share to be $ 7.45,” Mondello added.
Kroger (-0.8%), a U.S. retail group, released results that exceeded market expectations and raised their estimates, which did not prevent a sharp drop in prices before the Wall Street stock market. In the first fiscal quarter, the group made a net profit of $ 664 million and 90 cents on title, up from $ 140 million a year earlier. Adjusted earnings per share were $ 1.45, compared to the FactSet consensus of $ 1.29. Revenue reached $ 44.6 billion, compared to $ 41.3 billion a year earlier and $ 44.2 billion by consensus. Sales of the similar product increased by 4.1% excluding petrol, in line with market expectations. The group, raising its forecasts, is counting on the growth of ‘identical’ sales excluding fuel from 2.5 to 3.5%, for customized EPS from around $ 3.85 to $ 3.95. The FactSet consensus was for similar growth of 3.2% and adjusted EPS of $ 3.84.
Revlon (-7%), it is feared, filed for bankruptcy yesterday under Chapter 11 of the American law. The cosmetics and fragrance group controlled by MacAndrews & Forbes, the firm of billionaire Ronald Perelman, has listed assets and liabilities between $ 1 billion and $ 10 billion, according to a filing with the U.S. Bankruptcy Court for New York’s Southern District. The bankruptcy petition comes days after The Wall Street Journal reported that Revlon began negotiations with lenders before the debt matured to avoid bankruptcy.
Twitter (-2.4%). Elon Musk is addressing all employees on social media this Thursday Twitter for the first time since unveiling its initial $ 44 billion takeover plan. Business Insider, citing an email from Twitter CEO Parag Agrawal, reported earlier on the meeting. Agrawal, in his message, says employees can send their questions to the businessman in advance. The social media marketing director, Leslie Berland, will play the role of moderator during the event …
Musk should therefore confirm his intention to take control of Twitter during this general meeting. A person familiar with the issue told the Wall Street Journal that the billionaire is also expected to clarify recent comments on telecommuting at the meeting and to address aspects of his Twitter strategy.
You are here (-9.8%) is rising during that time its prices to cope with rising costs, many sources indicate. The electric vehicle designer has raised prices on all models in the United States, facing supply problems.
Meta Platforms (-5.5%). This was announced on Thursday by the Agency for Protection of Competition Meta, a former Facebook, has pledged to end practices that could cause concern in the French advertising market. Therefore, the Competition Agency accepts these obligations of the Mark Zuckerberg Group in order to modify its practice. Bloomberg notes that this allows Matt to avoid heavy fines after he offered to respond to French antitrust concerns about his online advertising market.
Meta, Google (Alphabet), Twitter and Microsoft agreed on Thursday to tighten their policy against “fake news”, under pressure from the European Union, which threatens sanctions in the event of non-compliance with a revised version of its code of best practice. on misinformation introduced in 2018. About 30 signatories have pledged to abide by the regulation, the European Commission said.
McDonald’s (-1.5%), the American fast food giant, would approve, his lawyers claim, the proposal of the prosecutor’s office in France to pay a fine of 1.245 billion euros. A fine would allow the group to avoid criminal proceedings for tax evasion between 2009 and 2020 in France.