Wall Street opens sharply lower, hangover after the Fed

Around 4:40 pm, the Nasdaq was down 4.20%, hurt by tech stocks, while the Dow Jones was down 2.05% and the broader S&P 500 index was down 2.78%.

The New York Stock Exchange opened sharply lower on Thursday, reeling from the euphoria that followed Wednesday’s announcement of a sharp rate hike by the Fed and comments from its chairman.

Around 14:40 GMT, the Nasdaq was down 4.20%, hurt by tech stocks, while the Dow Jones lost 2.05% and the broader S&P 500 index lost 2.78%.

On Wednesday, the market reacted positively, not so much to the announcement of a half-point increase in the US central bank (Fed) base rate, already priced in by investors, as to the statements of its president, Jerome Powell. .

The manager notably dismissed the prospect of a 0.75 point hike at a future meeting.

Within hours, operators had completely revised their expectations, and on Thursday estimated the probability of an increase of at least 0.75 point at the next June meeting as nil as they were evaluating it. Fed communication.

“It was a catalyst to know that an increase of + only + half a point was likely,” commented Patrick O’Hare of Briefing.com in a note.

For the analyst, some of the traders also seem to consider, in light of Wednesday’s decisions and comments, that the Fed “can control inflation without dragging the economy into a recession”.

However, after this collective relief, “the market is waking up and realizing that none of the structural problems that brought it down have been resolved,” said Adam Sarhan of 50 Park Investments.

“Inflation remains high,” he detailed, “the Fed will continue to raise rates and the slow growth picture has not changed.”

The indices were not helped by two bad indicators, the first reporting a slightly above-expected rise in weekly jobless claims, the other a drop in US productivity in the first quarter.

In the bond market, after suddenly relaxing after Jerome Powell’s press conference, rates rose again on Thursday.

The yield on 10-year US government bonds thus crossed the symbolic threshold of 3%, which it had already briefly crossed on Monday, for the first time since late 2018.

For Adam Sarhan, investors fear witnessing a “recession of earnings” of companies listed on Wall Street, a variation of the economic slowdown already at work in the United States.

A sentiment fueled by the cautious and even downright pessimistic forecasts of several companies that published their quarterly results on Wednesday and Thursday, particularly in the e-commerce sector.

Online sales site eBay fell (-7.17% to $50.52) despite sales and earnings above the Wall Street consensus, with observers mostly keeping the group’s second-quarter projections lower than the market.

E-commerce platform Shopify also collapsed at the start of trading (-17.61% to $399.99) after posting a much lower-than-expected trade volume as well as a significantly larger loss.

Another e-commerce site, Etsy, dedicated to artisans, was also penalized (-16.24% to $91.57), despite results in line with expectations, as its forecasts were considered disappointing, with a drop in the activity.

Twitter benefited (+3.59% to US$50.82) from the communication of Elon Musk, who managed to raise US$7 billion from investors to finance the acquisition of the platform.

This amount, collected from funds and wealthy investors such as businessman Larry Ellison or Saudi prince Al-Walid ben Talal, will allow the reduction of the amount lent to banks for the operation.

The parent company of the New York Stock Exchange NYSE, the Intercontinental Exchange (ICE) suffered sales (-3.02% to 106.54 dollars) after disclosing, on Wednesday after the exchange, the next acquisition of the computer services specialist for the real estate sector, Black Knight, for $13.1 billion.

Snap (-5.92%), Meta (parent company of Instagram, -4.47%) or Alphabet (parent company of YouTube, -3.84%) went into reversal after their fiercest competitor, TikTok, revealed on Wednesday that it would set up an advertising revenue-sharing system with the platform’s most popular creators.

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