New York (AFP) – The New York Stock Exchange opened sharply lower on Tuesday, spooked by a higher-than-expected US inflation gauge, which shows the battle against soaring prices is far from over and portends further monetary tightening. harder than expected.
Around 3:55 p.m. GMT, the Dow Jones dropped 1.92%, the Nasdaq index dropped 3.12% and the broader S&P 500 index lost 2.32%.
The CPI price index rose slightly by 0.1% in August compared to July, while economists had forecast a contraction of 0.1%.
Over one year, inflation in the United States reached 8.3%, down from July’s 8.5%, but more than the 8.0% forecast by the market.
“It’s a little disappointing,” commented Art Hogan of B. Riley Wealth Management, who also noted the negative surprise of the index excluding energy and food. The latter rose again by 0.6% over one month, against 0.3% expected and 0.3% in July.
Another black spot, food prices, which gained another 0.8% over one month and remained up 11.4% over one year.
“It is clear that inflation is stubborn, which will encourage the Fed (US central bank) to remain zealous”, concluded Art Hogan.
“Inflation figures remain unacceptable for those responsible” for monetary policy, added Rubeela Farooqi, chief economist at High Frequency Economics, in a note. “These data mark another rate hike of 0.75 basis points next week” by the Fed.
Traders immediately recalibrated their forecasts for the path of the Fed and now see the US central bank raising rates by at least 1.75 percentage points in total over its last three meetings of the year, against 1.50 point so far.
They even now give a non-negligible probability (18%) to the scenario of a one-point hike at the next meeting of the Fed’s Monetary Policy Committee, on September 21 and 22, a hypothesis that no one had considered until ‘until today.
“It is becoming increasingly clear to traders that the tightening already carried out by the Fed has not been enough to cool the economy and bring inflation down,” responded Charlie Ripley of Allianz Investment Management.
The prospect of an even longer-than-expected battle against inflation also stirred the bond market. The yield on 10-year US government bonds rose to 3.43%, from 3.35% the day before.
The US 2-year rate, which is more sensitive to medium-term monetary policy expectations, soared to 3.74%, against 3.57% the previous day, a peak for nearly 15 years (November 2007).
This blow to interest rates has put pressure on technology stocks, which are dependent on credit conditions to finance their growth.
The addition was heavy for Meta (-6.32%), Amazon (-4.92%), Nvidia (-5.40%) or AMD (-5.59%), but these are all heavyweights of the Nasdaq that sank in unison.
All members of the Dow Jones were also in the red.
“We had a nice rebound before this publication and there was enough to fall back,” explained Art Hogan.
While the increases of the last sessions had largely been fueled by the hope of a sharp deceleration in prices and a possible easing of the Fed from the end of 2023, “traders will be surprised to see how difficult it is to bring inflation under control,” said Chris Zaccarelli of the Independent Advisor Alliance.
Among the few few to come out of it, the specialist in liquefied natural gas (LNG) Cheniere (+ 4.03% to 167.21 dollars), the largest exporter of American LNG, which is taking full advantage of the surge in the market for gas and raised its guidance for the full year.
Another glimmer in the gloom, the Oracle software group (+0.66% to 77.59 dollars), which did better than expected on its quarterly turnover, supported by its remote computing activity (cloud) .
Twitter fell again (-1.21% to 40.91 dollars), on the eve of an important day for the social network, marked by the hearing of whistleblower Peiter Zatko in Congress and the general assembly extraordinary which must validate the takeover by Elon Musk, who has since officially given up.
The specialist in connected exercise bikes and treadmills Peloton unscrewed (-9.52% to 10.00 dollars) after the announcement of the departure of its co-founder John Foley, who is leaving his post as executive chairman. He had already given up that of general manager, in February.
© 2022 AFP