Wall Street Down Again, Scalded by Ongoing Inflation – 11/05/2022 at 10:56 PM

The New York Stock Exchange fell again on Wednesday, uncomfortably with a higher-than-expected inflation indicator, opening the door to an even stronger tightening of US monetary policy.

The Dow Jones fell 1.02% and the broader S&P 500 index 1.65%, but it was mainly the Nasdaq index that was disrupted, returning 3.18%.

Since its peak in late November, the technology stock barometer has melted nearly 30%.

The entire session was dominated by the release, before the opening of Wall Street, of the CPI consumer price index, which stood at 8.3% in April, up from 8.5% in March, but above 8.1%. that economists had expected.

During the first half of the day, the indices went on a roller coaster ride, marking the contradiction of two views on the indicator.

On the one hand, a positive reading. Cliff Hodge of Cornerstone Wealth concludes that “March will have been a peak” for inflation, which has started with “a slight slowdown”.

“Recession fears are exaggerated,” continued the analyst, for whom “consumers remain solid and continue to spend.”

The other part of the operators saw an alarming signal in this publication.

“Underlying inflation (excluding energy and food) has reached its fastest pace since January,” said Charlie Ripley of Allianz Investment Management, for whom this makes “the job” of the US central bank (Fed) “more delicate”.

“This continued inflation will prompt the Fed to raise interest rates more aggressively,” FHN Financial’s Will Compernolle anticipated.

“It could even lead to (members of the Fed) calling for a 0.75 percentage point hike in June,” he said, a prospect dismissed by Fed Chair Jerome Powell last week.

“The longer inflation lasts, the longer you’re willing to persevere in pushing it back,” said Globalt’s Keith Buchanan. “That’s what is causing this market reaction.”

Another illustration of a turbulent New York market, the bond market was rocked by brutal moves during the session.

Thus, 10-year US Treasury yields rose from 2.90% to 3.07%, before approaching the 2.92% level at the start of the day.

The Nasdaq, which has been regularly targeted for six months, toasted again, burdened by the specter of monetary tightening of unprecedented power for more than 40 years.

The tech heavyweights had one of their worst days of the year, with Apple losing 5.18%, Microsoft 3.32%, Tesla 8.25% and Meta (ex-Facebook) 4.51%.

In a week, Tesla saw its capitalization melt by nearly 23%.

The Dow Jones managed to limit its losses thanks to so-called defensive stocks, especially the industrial sector, such as Caterpillar (+1.09%), Chevron (+1.48%), Merck (+1.57%) or Dow (+ 1.49%).

Elsewhere on the exchange, cryptocurrency trading platform Coinbase fell (-26.44% to $53.72) after posting results below expectations on Tuesday after trading.

In keeping with the cryptocurrency route, the group saw monthly user numbers and transaction volumes decline from the fourth quarter.

The entire industry was swept up in the turmoil, from the Robinhood exchange (-12.08%) to the index-linked fund ProShares bitcoin Strategy ETF (-6.48%).

The first investment product of its kind in the United States, which launched with fanfare last October, has since lost more than half its value.

In addition, financial firms in the new economy, such as payment specialist Block (ex-Square, -15.61%) or online credit payment company Affirm (-19.57%), also suffered below.

Electronic Arts rose sharply (-7.97% to $120.49) despite the announcement of the end of its historic partnership with FIFA for the game of the same name and the quarterly results below expectations.


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