WALL STREET DOWN AS FED SIGNALS AGGRESSIVE POLICY
par David French
NEW YORK (Archyde.com) – The New York Stock Exchange ended lower on Thursday, giving up initial gains, as comments from U.S. Federal Reserve (Fed) Chairman Jerome Powell hinted at an aggressive rate hike policy from the central bank this year.
The Dow Jones index fell 1.05%, or 368.03 points, to 34,792.76 points.
The broader S&P-500 lost 65.79 points, or 1.48%, to 4,393.66 points.
The Nasdaq Composite fell for its part by 278.41 points (2.07%) to 13,174.65 points.
A 50 basis point interest rate hike will be “on the table” at the Fed’s May 3-4 monetary policy meeting, Jerome Powell said, as the U.S. central bank is expected to has raised rates several times this year.
With inflation nearly three times higher than the Fed’s 2% target, ‘it’s appropriate to act a little faster,’ Fed chairman told global economic panel by the International Monetary Fund (IMF).
“The market is betting on at least 50 basis points (ups) in May and June,” said George Catrambone, chief trading officer at DWS Group. “The market expects Fed officials to act aggressively,” he added, citing comments from Jerome Powell and other central bank officials.
These comments confirmed a seesaw on Wall Street where the strength of quarterly results, including those of Tesla, had fueled the gains of the main indices at the start of the session. The trend had changed on the S&P-500 and the Nasdaq even before Jerome Powell spoke.
Yields on US Treasuries rose, especially two-year bills, the most sensitive to changes in interest rates, which stood at a three-year high before falling slightly.
Faced with uncertainty surrounding the potential impact of higher interest rates on their growth, tech giants like Meta Platforms, Alphabet and Amazon declined.
Netflix fell for a second consecutive session, by 3.5%, after having reported during the publication of its quarterly results of a first loss of subscribers in ten years and warned that this decline could be accentuated this year.
The online video giant’s market capitalization fell below $100 billion for the first time since January 2018.
All the major sectors of the S&P-500 declined, foremost among them energy, despite the rise in oil, and technology.
However, the session was not totally gloomy. Tesla thus recorded gains (+3.2%) after publishing quarterly results above expectations on Wednesday, despite problems in supply chains.
Securities related to the aviation sector remained on a positive dynamic. United Airlines and American Airlines rose 9.3% and 3.8%, respectively, after saying they expected profits in the current quarter on a strong rebound in demand.
(French version Jean Terzian)