Wall Street is down again, burned by stubborn inflation – 05/11/2022 at 22:56

The New York Stock Exchange fell again on Wednesday, dissatisfied with higher-than-expected inflation, which opens the door for an even more marked tightening of US monetary policy.

The Dow dropped 1.02% and the broader S&P 500 shed 1.65%, but the Nasdaq was hit the hardest, gaining 3.18%.

Since its peak in late November, the barometer of tech stocks has melted by almost 30%.

The entire session was marked by the release of Wall Street’s pre-open CPI, which came in at 8.3% in April, up from 8.5% in March, but more than the 8.1% expected by economists.

During the first half of the day, the indices moved like a rollercoaster, marking the confrontation between the two visions of the indicator.

On the one hand, a positive read. Cliff Hodge of Cornerstone Wealth concludes that “March will be the peak” of inflation, which has begun a “slight slowdown”.

“Recession fears are exaggerated,” continued the analyst, for whom “the consumer remains firm and continues to spend.”

Another part of the operators saw this publication as a wake-up call.

“Core inflation (excluding energy and food) is at its fastest pace since January,” said Allianz Investment Management’s Charlie Ripley, for whom it “makes the job” of the US central bank (Fed) “more delicate.”

“This persistent inflation will push the Fed to (raise rates) more aggressively,” predicted Will Compernoll of FHN Financial.

“It could even lead to (Fed members) advocating a 0.75 percentage point hike in June,” he said, but Fed Chairman Jerome Powell dismissed the prospect last week.

“The longer inflation lasts, the longer you are willing to tolerate it going down,” commented Keith Buchanan of Globalt. “That’s what’s causing the market to react like that.”

Another illustration of the turbulent market in New York: the bond market was shaking with sharp movements throughout the session.

Thus, the yield on 10-year US government bonds soared from 2.90% to 3.07%, and then fell almost to its level at the beginning of the day – 2.92%.

For six months, the Nasdaq has been toasted again, weighed down by the specter of monetary tightening with unprecedented force in more than 40 years.

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

Over the week, Tesla’s capitalization fell by almost 23%.

As for the Dow Jones, it managed to limit its losses thanks to the so-called defensive values, in particular the industrial sector, such as Caterpillar (+1.09%), Chevron (+1.48%), Merck (+1.57%) . or Dow (+1.49%).

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

In line with the debacle of cryptocurrencies, the group saw a decline in monthly user numbers and transaction volumes compared to the fourth quarter.

The entire sector was in turmoil, from the Robinhood Stock Exchange (-12.08%) to the ProShares bitcoin Strategy ETF (-6.48%).

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

In addition, new economy financial firms such as payments specialist Block (ex-Square, -15.61%) or online credit payments company Affirm (-19.57%) were also affected.

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

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