The New York Stock Exchange ended lower on Wednesday, hurt by the acceleration of inflation in the United States, but finally limited its losses, getting used to the idea that the American Central Bank (Fed) was ready to be even more aggressive.
The Dow Jones lost 0.67%, the tech-heavy Nasdaq index fell 0.15%, and the broader S&P 500 index fell 0.45%.
The CPI price index in June showed a rise of 9.1% over one year, more than the 8.8% expected by economists. This is the highest one-year figure since November 1981.
The surprise of the CPI is, in large part, linked to the explosion in gasoline prices (+11.2% in June over one year). But economists also noted that so-called core inflation, ie excluding energy and food, was also higher than expected.
“Inflation is now entrenched and that is exactly what worries investors and central bankers the most,” said Jeffrey Roach of LPL Financial.
The figure “is ugly, there is no squirming”, commented Cliff Hodge, of Conerstone Wealth. “The Fed has no choice and needs to be even more aggressive, which increases the likelihood of a recession next year.”
As the session progressed, the scenario of a one-point rate hike at the next Fed Monetary Committee meeting in late July began to emerge, which would be a first since the 1980s.
Operators now assess the probability of such an increase at 77%, whereas they considered it zero a week ago.
However, this hypothesis of a Fed flexing its muscle like never before for more than 30 years has not caused Wall Street to drop out.
“Currently, the market wants the Fed to act as quickly and as strongly as possible”, deciphered Gregori Volokhine, of Meeschaert Financial Services.
“If the inflation numbers are very high while the economy continues to do well, the Fed will be aggressive and fairly quickly we will turn that page of rate hikes,” he continued. “That’s why the market doesn’t collapse.”
“Currently”, according to him, “the only risk for the economy is inflation. That it breaks consumption by cutting purchasing power.”
So, while the idea of an even steeper monetary policy trajectory is, in theory, very unfavorable to technology and growth stocks, several of them have returned to the green during the session.
Amazon (+1.08%), Tesla (+1.70%) or Qualcomm (+2.02%) all ended up sharply.
Another surprise, following having jumped initially following the publication of the CPI index, bond yields have turned back. The yield on US 10-year bonds eased to 2.92% from 2.96% the previous day.
The 2-year rate, on the other hand, rose to 3.13%, once morest 3.04%, a sign that the market expects less growth in the long term than in the medium term, which augurs for a possible recession.
Immediately following the publication of the CPI, the dollar rose, for the first time since 2002, above the euro, at 0.9998 dollars for the euro.
On Wednesday’s session, Wall Street delivered an improbable cocktail, with many technology stocks rising, in tune with several so-called defensive stocks, i.e. less sensitive to the economy, such as PepsiCo (+0.35 %), Kraft Heinz (+0.98%) or Merck (+0.18%).
Twitter shares took off (+7.90% to 36.75 dollars) following the alternative fund (hedge fund) Hindenburg Research revealed that it had taken a stake in the capital of the social network, convinced that the platform has a “solid file to prevail in court once morest Elon Musk.
Although having managed to generate a profit in the second quarter, the company Delta Air Lines did less well than expected, which earned it a sanction from the market (-4.47% to 29.70 dollars).
The airline took the entire sector with it, from American Airlines (-3.11%) to United Airlines (-0.84%).
