Wall Street falls at the open after inflation disappointment

Wall Street falls at the open after inflation disappointment

The facade of the New York Stock Exchange (GETTY IMAGES NORTH AMERICA/SPENCER PLATT)

The New York Stock Exchange opened sharply lower on Tuesday, spooked by a higher-than-expected US inflation gauge, showing the battle against rising prices is far from over and portends a stronger-than-expected monetary tightening.

At around 3:55pm GMT, the Dow Jones Industrial Average fell 1.92%, the Nasdaq Index fell 3.12%, and the broader S&P 500 Index lost 2.32%.

The CPI price index rose slightly 0.1% in August compared to July, while economists had forecast a 0.1% contraction.

In one year, inflation in the United States reached 8.3%, down from 8.5% in July, but higher than the 8.0% expected by the market.

“It’s a little disappointing,” said Art Hogan of B. Riley Wealth Management, who also noted the negative surprise in the index excluding energy and food. The latter rose again by 0.6% in one month, compared to the 0.3% forecast and 0.3% in July.

Another black point, food prices, which gained another 0.8% in one month and remained at 11.4% in one year.

“It is clear that inflation is stubborn, which will encourage the Fed (US central bank) to remain jealous,” concluded Art Hogan.

“Inflation figures remain unacceptable to policy makers,” added Rubeela Farooqi, chief economist at High Frequency Economics, in a note. “This data marks another rate hike of 0.75 basis points next week” by the Fed.

Traders immediately recalibrated their forecasts for the Fed’s path and now see the US central bank raising rates by at least 1.75 percentage points in total during its last three meetings of the year, up from 1, 50 points so far.

Ils according to the same maintenant une probabilité non negligeable (18%) au scénario d’une hausse d’un point lors de la prochaine réunion du Comite de politique monétaire de la Fed, les 21 et 22 septembre, une hypothèse que nul n’envisageait jusqu ‘until today.

“It is becoming increasingly clear to traders that the tightening already done by the Fed has not been enough to cool the economy and reduce inflation,” responded Charlie Ripley of Allianz Investment Management.

The prospect of an even longer-than-expected battle against inflation also rattled the bond market. The 10-year US government bond yield rose to 3.43%, from 3.35% the day before.

The US 2-year rate, more sensitive to medium-term monetary policy expectations, soared to 3.74% from 3.57% the day before, a nearly 15-year high (Nov of 2007).

This hit to interest rates has put pressure on tech stocks, which rely on credit conditions to finance their growth.

The incorporation was heavy for Meta (-6.32%), Amazon (-4.92%), Nvidia (-5.40%) or AMD (-5.59%), but these are all heavyweights of the Nasdaq that sank in unison.

All members of the Dow Jones were also in the red.

“We had a good rally before this post and there was enough to push back,” Art Hogan explained.

While the gains in recent sessions have been largely fueled by hopes of a sharp price slowdown and possible Fed easing from late 2023, “traders will be surprised to see how difficult it is control inflation. said Chris Zaccarelli of the Independent Advisor Alliance.

Among the few to come out of it, liquefied natural gas (LNG) specialist Cheniere (+4.03% to $167.21), the largest American LNG exporter, which is taking full advantage of the booming gas market and raised its guidance for the full year.

Another glimmer in the gloom, the Oracle software group (+0.66% to $77.59), which posted better-than-expected results in its quarterly turnover, supported by its remote (cloud) computing activity.

Twitter fell again (-1.21% to 40.91 dollars), on the eve of an important day for the social network, marked by the hearing of the whistleblower Peiter Zatko in Congress and the extraordinary general assembly that must validate the taking of possession of Elon Musk, who has since officially surrendered.

The specialist in stationary bicycles and connected treadmills Pelotón unscrewed (-9.52% to 10.00 dollars) after the announcement of the departure of its co-founder John Foley, who is leaving his position as executive president. He had already resigned as CEO in February.


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