Wall Street in sharp fall after the forceful speech of the president of the Fed

Wall Street in sharp fall after the forceful speech of the president of the Fed


An operator of the New York Stock Exchange (AFP/ANGELA WEISS)

The New York Stock Exchange resolutely moved in the red this Friday in response to the firm statements of the president of the US central bank (Fed), determined to continue the fight against inflation, at the risk of slowing down the economy.

At around 15:10 GMT, the Dow lost 1.49%, the Nasdaq 2.37% and the broader S&P 500 1.85%.

Jerome Powell has clearly stated his determination to continue the tightening cycle to curb the price rally, to the point of pursuing monetary policy “tight enough to bring inflation to 2%”, i.e. slow the economy voluntarily.

Returning to price stability “will take time” and will lead to “a long period of weaker growth” as well as “a slowdown in the labor market,” hammered the central banker, within the framework of the Jackson Hole (Wyoming) symposium. .

“It was unequivocal,” reacted Quincy Krosby of LPL Financial, “despite being criticized after the last Fed meeting (in July) for being ambiguous, which had thrown markets into confusion,” with some investors imagining that the Federal Reserve was about to lighten up.

While before the speech the operators granted a probability equivalent to a rise of half a point and 0.75 percentage points in the Fed’s reference rate at its next meeting, at the end of September the cursor has clearly tilted towards the second option after Jerome Powell’s. speech.

For Chris Zaccarelli, from Advisor Alliance, the president of the Fed “did not say anything new” and was content to “reiterate what he has been saying for several months.”

While indices fell sharply, in the bond market, the 2-year US government bond yield, which reflects more changes in monetary policy than the 10-year rate, approached 3.45 %, a 15-year peak reached in mid-June. .

This increased expectation of further rate hikes hurt the tech sector, which relies on credit conditions to finance its growth. Alphabet (-4.21%), Amazon (-2.75%) and Meta (-2.95%) experienced the sequence poorly.

After a fairly marked setback due to the intervention of the Fed president, the dollar recovered against the euro, again within a breath of parity, the threshold above which it had fallen.

Jerome Powell’s authoritative message overshadowed the string of strong US indicators that had initially led the market, in particular the slight drop in US prices in July compared to the previous month, according to the index. PCE published on Friday.

The one-year inflation rate fell to 6.3% from 6.8% in June.

In another encouraging figure, the University of Michigan Consumer Confidence Index rose sharply in July, well above expectations. In addition, consumers have revised down their inflation forecasts for the horizons of one and five years.

On the one hand, Electronic Arts gained height (+5.78% to $134.39), pushed by information from the Swedish media outlet GLHF, according to which Amazon would be about to make a public takeover bid for the video game publisher.

The ready-to-wear brand Gap was penalized (-1.80 to 9.83 dollars) after the drop in its turnover, a loss in its second quarter (ended at the end of July) and the group’s decision not to make more forecasts for its entire financial year, due to too much uncertainty.

Affected, like its German partner BioNTech, by a lawsuit by the biotech company Moderna (-2.06%) for patent infringement, Pfizer fell 1.15% to 47.35 dollars. The case concerns patents related to so-called messenger RNA technology, which allowed the accelerated development of the first vaccines against Covid-19.

Computer maker Dell Technologies suffered (-10.15% to $43.04) after the announcement of quarterly sales below expectations, along with cautious comments about the second half and a slowdown in demand.

The specialist in online installment payments Affirm slipped (-20.40% to 24.86 dollars), the day after the publication, after the stock market, of a higher-than-expected loss and forecasts considered disappointing for its ongoing exercise.

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