A New York Stock Exchange operator (AFP/ANGELA WEISS)
The New York Stock Exchange ended sharply lower on Friday, seized by the promise of the president of the American central bank to continue to raise rates and to maintain them permanently at a high level to calm inflation.
The Dow Jones dropped 3.03%, 32,283.40 points, and dropped more than 1,000 points, its worst performance in a session since mid-May, more than three months. The Nasdaq index fell by 3.94%, to 12,141.71 points, and the broader S&P 500 index by 3.37%, to 4,057.66 points.
At the end of this calamitous session, the S&P 500 returned to its lowest closing level for a month.
US Federal Reserve (Fed) Chairman Jerome Powell made clear on Friday his determination to continue the tightening cycle to curb soaring prices, to the point of conducting a monetary policy “sufficiently restrictive to bring inflation down to 2%” , that is to say, which voluntarily slows down the economy.
The trained lawyer and former investment banker also indicated that this restrictive monetary policy, which corresponds to a high rate level, should last “some time”.
Returning to price stability will lead to “a long period of weaker growth” as well as “a slowdown in the labor market”, hammered the central banker, as part of the Jackson Hole (Wyoming) symposium, the high mass Annual Central Bankers.
“Markets aren’t reacting this way because Chairman Powell’s speech was blunt, but rather because the last possibility of a “near-term repositioning and easing of monetary policy by the Fed” has been ruled out. “, explained Keith Buchanan (of Globalt Investments).
After the highly anticipated exit of Jerome Powell, traders were mostly betting on another 0.75 percentage point hike in the Fed’s key rate, which would be the third in a row, at its next meeting on September 21-22. .
On the bond market, the yield on 3-month US Treasury bills, a maturity more sensitive to variations in monetary policy than the 10-year rate, reached its highest level in almost 14 years, at 2.82%.
This blow to interest rates has burned technology stocks, which are very dependent on credit conditions because they must find financing to fuel their growth.
Amazon (-4.76%), Alphabet (-5.44%), and even Apple (-3.77%) all slumped, as did graphics card maker Nvidia (-9.23%) and the software publisher Adobe (-5.67%).
The VIX index, which measures market volatility, jumped more than 17% on Friday.
Jerome Powell’s authoritative message eclipsed the string of strong US indicators that had initially carried the market, in particular the slight decline in US prices in July compared to the previous month, according to the PCE index published on Friday.
The rate of inflation over one year fell to 6.3% once morest 6.8% in June.
Another encouraging figure, the consumer confidence index, established by the University of Michigan, rose sharply in July, well above expectations. In addition, consumers have revised down their inflation forecasts for the one-year and five-year horizons.
On the side, Electronic Arts has gained height (+ 3.57% to 132.17 dollars), pushed by information from the Swedish media GLHF, according to which Amazon is regarding to make a takeover offer for the video game publisher.
Targeted, like its German partner BioNTech, by a lawsuit from biotech Moderna (-3.77%) for patent infringement, Pfizer fell 2.21% to 46.84 dollars. The case concerns patents related to so-called messenger RNA technology, which enabled the accelerated development of the first vaccines once morest Covid-19.
Computer maker Dell Technologies suffered (-13.53% to 41.42 dollars) following the announcement of quarterly sales below expectations, coupled with cautious comments on the second half and a slowdown in the request.
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