Wall Street suffered steep losses this Friday cause of the surprising acceleration in a price indicator that the Federal Reserve watches closelycrowning as the worst week of 2023 a period that was marked by the adjustment in rate expectations and geopolitical nervousness in the face of the anniversary of the Russian invasion in Ukraine.
At the close of the New York Stock Exchange, the Nasdaq Composite lost 1.69%, the S&P 500 fell 1.05% and the Dow Jones lost 1.02%. On a weekly basis, the Nasdaq contracted 3.89%, the S&P 500 erased 2.94% and the Dow fell 2.61%.
The S&P 500 missed the 4,000 point mark and posted its biggest weekly drop since Friday, December 9. In turn, the Nasdaq completely wiped out the gains made in February and settled right at its 200-day moving average.
In Chile, the S&P IPSA rose 0.35% to 5,331.57 pointswith which he managed to close the week practically unchanged. The price of the dollar registered its biggest jump of 2023.
In Europe, the regional Euro Stoxx 50 lost 1.86% and ended the week down 2.25%. Throughout the session, the CAC 40 in Paris fell 1.78%, the DAX in Frankfurt fell 1.72% and the FTSE 100 in London fell 0.37%.
Citi sees a fall for US stocks and a possible recession
The trigger
This morning it was revealed that The US core personal consumption deflator index returned an annual change of 4.7% in January, unexpectedly accelerating from 4.4% the previous month, when a drop to 4.3% was expected. The number surpassed even the top estimate of analysts polled by Bloomberg.
The indicator -which shows the variation in GDP prices excluding volatile components- is considered by the market as the Fed’s preferred inflation data, due to the relevance that the entity assigns to it in its projections.
While the number beat even the top estimate of analysts surveyed by Bloomberg, it was in line with the second estimate of GDP for the fourth quarter of 2022 in the USwhere the core deflator index was revised upwards.
The two-year Treasury bond jumped 11.6 basis points (bp) to the highest since July 2007while futures operators raised their terminal rate forecasts above 5.40%.
“These data help support the Fed’s view that Rates should continue to rise and hold for longer”City Index US markets analyst Joe Perry wrote in a note.
“Let us remember that, according to the minutes published on Wednesdaymost of the participants in the February meeting considered it appropriate to raise rates by 25bp, and some even considered that it was possible to do it by 50bp,” he added.
Later, US new home sales surprised with a strong 7.2% m/m increase in January (only 0.7% increase expected)while the previous series was revised to 7.2% from 2.3% mom.
Today, Friday, marked one year since Russia invaded Ukraine, so investors were also on the lookout for any potential focus of confrontation between Washington and the Russia-China alliance.
This, following Moscow announced this week that will suspend its participation in the arms pact New START Treatywith the presence of the Chinese foreign minister on a diplomatic trip to strengthen relations between the two countries.
After a year of Russia-Ukraine conflict, restrictions on food exports begin to be reduced
Asian market
At the close of the Asian stock markets, there were mixed results. Tokyo’s Nikkei 225 rose 1.29%, but Hong Kong’s Hang Seng lost 1.68% and mainland China’s CSI 300 fell 1.04%. On a weekly basis, the Nikkei fell 0.22%, the Hang Seng contracted 3.43% and the CSI gained 0.66%.
It was reported last night that Japan’s price advance continued to accelerate in January, although core components have accelerated at a slightly slower pace than anticipated.
The CPI was estimated at 4.3% per year (as expected), while the CPI excluding fresh food and energy reached a rate of 3.2%, one tenth below estimates. Inflation is at its highest since the early 1980s.
