U.S. stocks close sharply lower on worries that the Fed may be too heavy – zimo News


The New York Stock Exchange closed sharply lower on Thursday, as forcible central bank action led by the Federal Reserve will suffocate an economy already showing signs of weakness.

The Dow lost nearly 1,000 points intraday and closed down 2.42%, below 30,000 for the first time since January 2021, the Nasdaq lost 4 points, or 08%, and the broader S&P 500 lost 3.25%.

“In the wake of (the Fed’s statement), Wall Street quickly lost the enthusiasm it started yesterday, as other major central banks also became more aggressive in fighting inflation on their own,” Oanda’s Edward Moya explained in a note.

Following the Fed on Wednesday, the Bank of England also raised its key interest rate on Thursday, but only by 0.25 points, as did the Swiss National Bank, which completely surprised investors.

Maris Ogg explains: “When people think about the impact all central banks acting at the same time could have on overall tightening, they say to themselves: I have some profit to take, let’s go” and start selling, Tower Bridge Advisors portfolio manager.

“As the Fed shrinks its balance sheet (starting in June), the market expects another 0.75 percentage point rate hike at the Fed’s next meeting,” traders wondered “if the Fed isn’t going astray” and where in its policy Too Fast Too Strong Monetary tightening, commented LPL Financial’s Quincy Krosby.

Adding to the gloom was a series of poor indicators, starting with an index of manufacturing activity in the Philadelphia area, which showed a contraction in June (-3.3 points), while economists expected progress (+4.8 points).

Another cloud that dimmed the outlook for the U.S. economy was the gradual rise in unemployment, illustrated by the higher-than-expected weekly registrations (229,000). For Peter Boockvar of Bleakley Consulting Group, “the increase in layoffs is watching us, the question is to know what the tempo will be”.

The last negative sign was that U.S. housing starts fell below expectations.

Maris Ogg said the first signs of a slowdown were starting to appear, “so the question is whether that will affect the pace of inflation”. “Because the Fed is more concerned with that” than economic growth. “If not, they don’t seem to be going to stop (rising rates) despite signs that consumer confidence in the economy is falling.”

For Maris Ogg, the ongoing global monetary tightening and the exit of certain investors looking to limit their exposure threaten market liquidity, which could further increase volatility and create an even more brutal shock.

For example, the yield on 10-year U.S. government bonds moved 0.26 percentage points on Thursday, a very unusual range in a market that typically moves very cautiously. It was 3.23% compared to 3.39% the day before.

In terms of stocks, tech giants led losses, from Meta (-5.01%) to Apple (-3.97%), through Microsoft (-2.70%) and Alphabet (-3.40%).

Twitter also closed with a loss (-1.66% to $37.36), further from the takeover price ($54.20) proposed by Elon Musk, who was vague about the platform’s plans during a meeting with employees on Thursday. speech.

As for Tesla, which is led by the billionaire entrepreneur, it was leaked (-8.54% to $639.30) after announcing price hikes for its models, but also concerns that Twitter documents would be distracting.

Among the few listed stocks are mainly so-called defensive stocks, i.e. stocks that are less sensitive to the economic situation, such as Walmart (+1.04%), Johnson & Johnson (+0.05%) or Procter & Gamble (+0.61%).

Revlon Cosmetics Group was challenged after announcing its bankruptcy filing on Wednesday (-13.33% to $1.95), which should allow it to restructure. The company has had a rough time amid the pandemic, which has led to a slowdown in spending on certain beauty products.

Source link


Please enter your comment!
Please enter your name here