(New York) The New York Stock Exchange finally ended in the red on Friday, cut in its tracks by the interruption of talks on the American debt ceiling which are now on “pause”.
The indices that had started in the green lost 0.33% for the Dow Jones at 33,426.63 points, 0.24% for the NASDAQ (12,657.90 points) and 0.15% for the S&P 500 (4191 .98 points).
The leader of the Republicans in the House of Representatives Kevin McCarthy showered the optimism which reigned the day before on the negotiations, affirming at the end of the morning that they should be put “on pause”.
A few moments earlier, the White House admitted to stumbling over “real differences” with the Republican opposition and indicated that the discussions were “difficult”.
Much is at stake as time is running out to allow the United States to borrow again before the 1er June, otherwise the country could default on its debt, a catastrophic eventuality for global financial markets.
Immediately after this news, equities reversed course, bond rates slowed their rise and above all, gold, the safe haven par excellence, jumped from 19 dollars to 1978.90 dollars an ounce.
“The disappointment over the debt negotiations is certainly” at the origin of the depression in equities, said Jack Ablin of Cresset Capital.
“What you have to look at is gold, it’s a very good barometer of the debt ceiling debate,” he added.
Gold, the big beneficiary
The analyst recalled that in 2011 when the United States had come close to defaulting to the point of seeing the debt rating of the world’s largest borrower lowered by a rating agency, gold had been “a big beneficiary”. panic in the markets.
“It’s the safe haven”, because in the event of a threat of default “the dollar will go down, bond yields will go down and equities will go down”, he warned.
On the bond market, yields on two-year Treasury bills lost some of their range to 4.29% against 4.33% in the first part of the session and 4.25% the day before.
Added to this pessimism about the talks between the administration and the White House were reactions to comments by US Treasury Secretary Janet Yellen on the banking sector, which put investors off.
The latter affirmed Thursday before a meeting of CEOs of the big banks that other bank mergers would perhaps be “necessary”, according to echoes in the press published on Friday.
After the regional banking crisis which saw several establishments go out of business or be bought out in a hurry, these comments “suggested that the situation is perhaps worse than we think”, commented Jack Ablin.
Shares of regional banks, though up at the start of the session, nosedived like PacWest (-1.88%), Western Alliance (-2.44%) and Zions (-1.73%).
As for Jerome Powell, the boss of the Fed, who spoke during a conference on monetary policy, he assured that “no decision” had been taken on interest rates for the next meeting. of June.
For Edward Moya of Oanda, the Fed Chairman has “paved the way for a pause” in rate hikes. But for Pat O’Hare of Briefing, these statements were “flavorless”.
On the odds, Disney fell 2.57% to 91.35 dollars after announcing that it was giving up the construction of a campus for its employees of almost a billion dollars in Florida while the entertainment group is in the midst of a falling out with state governor Ron DeSantis.
Morgan Stanley bank fell 2.66% after its CEO James Gorman, 64, announced on Friday that he intended to step down within the year, sparking a race for his succession.
Sports shoe retailer Foot Locker slumped 27.24% as its first quarter results were disappointing and the retailer lowered its full-year earnings forecast.
The Toronto Stock Exchange
The strength of the energy sector allowed the Toronto Stock Exchange to close with a slight gain on Friday, while the major American indices lost feathers.
Canada outperformed U.S. markets on Friday, after lagging for most of the week, observed Brian Madden, chief investment officer at First Avenue Investment Counsel. Stocks south of the border made gains in the morning, which turned into losses after Republicans announced they were suspending talks on the US debt ceiling, which aims to prevent a default of payment.
The Toronto floor’s S&P/TSX Composite Index climbed 53.97 points to end the session with 20,351.06 points.
In the United States, ongoing debt ceiling talks have weighed on markets, Madden said.
“I think what’s really happening this week, and probably next week, is that the US markets are in the political headlines, because the quarterly earnings season is, by and large, over and all all eyes are on the debt ceiling discussions right now,” he explained.
Debt ceiling talks came to an abrupt halt on Friday, and no one knows when they will resume, even as the United States nears a potential crisis. A White House official said there were “real differences” that made talks difficult.
Meanwhile in Canada, new retail sales data for March has been released, with inconclusive results, Madden said: Sales were weaker for the month, in part due to sales of automobiles and fuel, but Statistics Canada announced that early estimates for April pointed to a gain.
“It’s not really an unambiguous sign that the economy is really going to the bottom, but it’s not super bullish either,” Madden said.
Investors are “eager” for Canadian banks to report results next week, which will end the earnings season north of the border, he said.
In the United States, Federal Reserve Chairman Jerome Powell has signaled that a pause in interest rate hikes is likely in June, which would be the first pause since the central bank began raising its rate. key rate more than a year ago to fight inflation.
Markets are still pricing in rate cuts by the end of the year, even though Powell has made it clear the Fed intends to keep rates higher for longer, Madden noted.
“Investors are fighting with the Fed and believing it is bluffing. […] There’s a little tug of war,” he said, adding that from his company’s perspective, “we believe Mr. Powell, we don’t believe the markets.”
In the currency market, the Canadian dollar traded at an average rate of 74.06 cents US, down from 74.07 cents US on Thursday.
On the New York Commodities Exchange, crude oil fell 25 cents US to US$71.69 a barrel and natural gas fell less than 1 cent US to US$2.59 a million. BTUs.
The price of gold climbed US$21.80 to US$1981.60 an ounce and that of copper rose 4 cents US to US$3.73 a pound.
The Canadian Press