(New York) The New York Stock Exchange ended lower on Thursday, the indices turning around after statements by the President of the American Central Bank (Fed), which almost formalized a marked increase in rates in May.
Updated yesterday at 6:01 p.m.
The Dow Jones fell 1.05%, the technology-heavy NASDAQ index fell 2.07%, and the broader S&P 500 index fell 1.48%.
“Today, whether it’s stocks or bonds, everything is linked to the ECB and the Fed,” explained Karl Haeling, analyst at LBBW bank.
In an interview with the Bloomberg agency, the vice-president of the European Central Bank, Luis de Guindos, indicated Thursday that the end of net purchases of debt securities “should” stop in July.
He also felt that a rate hike “in July (was) possible”.
At a roundtable on Thursday on the sidelines of the spring meetings of the International Monetary Fund (IMF), Fed Chairman Jerome Powell told him that a rate hike of half a percentage point “( would) be on the table at the May meeting” (the 3rd and 4th).
“This parade of Fed officials with aggressive comments (on the monetary level) means that the market now expects three consecutive half-point increases”, noted Karl Haeling.
In the wake of Jerome Powell’s remarks, bond rates went up significantly.
The yield on 10-year US government bonds climbed as high as 2.95%, not far from its three-and-a-half-year high reached on Wednesday (2.97%).
Karl Haeling expects markets, “particularly bonds, to remain weak until the next Fed meeting.”
Comments from central bankers erased the gains recorded at the start of the session thanks to a few results from high-profile companies, first and foremost Tesla.
The manufacturer (+ 3.23% to 1008.78 dollars) has, in fact, published Wednesday, after the stock market, a record net profit of 3.3 billion dollars in the first quarter, much better than the 2.2 billion expected .
Tesla has played with supply problems and confinements in China, to the point that CEO Elon Musk considered it possible to end the year with a 60% growth in production.
Wall Street was also carried away by the results of American Airlines (+3.80%) and its competitor United Airlines (+9.31%), and their encouraging speech on the resumption of attendance.
If they still recorded heavy losses in the first quarter, the two airlines expect a return to profitability in the second quarter.
These sought-after stocks have escaped the cold snap that gripped Wall Street, and painted red most of the growth stocks, in difficulty in a context of rate hikes.
The graphics card manufacturer Nvidia (-6.05%) or the semiconductor specialists AMD (-4.44%) or Qualcomm (-3.01%) have thus plunged.
Netflix also had another difficult day (-3.52% to 218.22 dollars), after the 35% drop on Wednesday. Investors are still digesting the results published on Tuesday, which showed a net loss of subscribers, a first for more than ten years.
To make matters worse, investor Bill Ackman announced that his company had offloaded hundreds of millions of dollars of Netflix titles, due to questions about the group’s trajectory.
Investors were also seduced by the publication of the American chemical giant Dow (+2.92% to 69.51 dollars), which managed to increase its prices by more than 20% over one year.
Disney lost ground (-2.34% to 121.66 dollars) after the abolition, by the Parliament of the State of Florida, of the favorable tax status enjoyed by the Disney World amusement park.
Floridian elected officials have thus sanctioned the group for having criticized a law prohibiting the mention of sexual orientation or gender identity in elementary school.
Toronto Stock Exchange records worst session in three months
The Toronto Stock Exchange closed lower on Thursday, recording its worst session in three months, dragged down by fears of an economic slowdown as members of the United States Federal Reserve signaled that a dynamic hike in interest rates interest would take place next month in an attempt to fight inflation.
Craig Jerusalim, portfolio manager at CIBC Asset Management, said the day started on a high note as claims for unemployment benefits in the United States hit their lowest level since 1969 and Tesla recorded a big gain on Wednesday night.
But markets soured after U.S. central bank President Jerome Powell spoke of the tightness of the labor market and the need for higher rates to calm inflation.
During a roundtable organized by the International Monetary Fund, Mr. Powell suggested that “there is something in the idea of preparing aggressive rate hikes”.
“This has led to an expectation to see a tightening of financial conditions which are putting pressure on growth and valuations and essentially the market has been selling all session since then,” Jerusalim explained in an interview.
On top of that, the most supportive member of the central bank’s rate hikes, St. Louis Fed President James Bullard, said he was open to a 75 basis point hike during the May meeting.
“The market had climbed the wall of worry, but I think rising interest rates are just too much for him to handle,” Jerusalim added.
The Toronto floor’s S&P/TSX Composite Index lost 347.97 points, or 1.6%, to end the session with 21,650.41 points. It was his worst performance since January 21.
All eleven sectors of the TSX fell on Thursday, but the biggest declines were in materials, energy and information technology.
In the currency market, the Canadian dollar traded at an average rate of 79.81 US cents, down from 79.99 US cents the previous day.
On the New York Commodity Exchange, crude oil prices rose US$1.60 to US$103.79 a barrel, while natural gas rose 2 cents US$ to US$6.96 a barrel. million BTUs.
The price of gold fell US$7.40 to US$1,948.20 an ounce and that of copper rose 5.2 cents US to US$4.70 a pound.
The Canadian Press