(New York) The New York Stock Exchange ended clearly in the red on Wednesday, depressed by a sharp rise in bond yields reflecting uncertainties about the intentions of the American central bank.
The Dow Jones index dropped 1.06% to 38,441.54 points, the technology-dominated NASDAQ lost 0.58% to 16,920.58 points, the S&P 500 lost 0.74% to 5,266 , 895 points.
Yields on US Treasuries, which move inversely to bond prices, were the star of the session, rising significantly to the detriment of investments in stocks.
The ten-year rate stood at 4.61% around 3:55 p.m. (Eastern time) compared to 4.55% the day before and 4.46% Tuesday morning.
Stronger than expected American consumer confidence, a mixed reception to the last three Treasury bond issues and strict comments from a member of the Fed have made investors cautious about stocks.
On Tuesday, Minneapolis Fed President Neel Kashkari estimated that no member of the Fed “had completely ruled out the possibility of a rate hike,” noted Chris Low of FHN Financial.
“Of course, the important data of the week is the PCE inflation index for Friday, but for the moment it appears that the Treasury bond issues have not gone very well”, with fewer purchases than expected, “which has strained yields and compressed stock multiples,” Tom Cahill of Ventura Wealth Management told AFP, referring to corporate profitability ratios.
The issues of two- and five-year bonds on Tuesday and seven-year bonds on Wednesday received a mixed reception: “with the Fed not signaling that it will reduce rates, investors are hesitant to buy bonds if they do not know not whether there will be one, two or no interest rate cuts,” Mr. Cahill added.
The publication of the Fed’s Beige Book, the last report on economic activity before the next monetary meeting on June 12, did little to boost traders’ morale.
Businesses “in most regions noted that consumers resisted further price increases, leading to lower profit margins,” the Beige Book points out.
“This indicates that inflation certainly continues to moderate, but it shows that corporate margins will start to compress,” noted the Ventura Wealth Management analyst.
The eleven sectors of the S&P concluded at half mast, led by energy (-1.76%) and industry (-1.42%).
After a hesitant session, Nvidia, the specialist in chips for AI, managed to gain another 0.81% after an increase of almost 7% the day before.
In the wake of a lowering of its financial forecasts for the second quarter, American Airlines took a nosedive (-13.64% to $11.62) and dragged down most airlines, but also cruise companies.
AA has recognized the flaws in a new marketing strategy which caused it to lose business travel bookings and will remedy the situation. The company is also parting ways with its commercial director.
Delta lost 0.74% and Southwest Airlines fell 3.83%. United Airlines, on the other hand, took advantage of the situation, taking 2.35%.
Carnival Cruises slipped 2.75% and Royal Carribean 1.45%.
The oil company Chevron fell 1.35% to $156.90 after Hess shareholders approved the buyout of this group for $53 billion.
Its rival ConocoPhillips fell 3.12% on the announcement of the acquisition of Marathon Oil (+8.43%) valued at $22.5 billion, including debt.
The TSX falls more than 300 points
Canada’s main stock index fell 1.6% on Wednesday, part of a broad-based decline, while U.S. stock markets also lost ground.
The S&P/TSX Composite Index lost 367.07 points to 21,897.98.
On the currency market, the Canadian dollar was trading at 72.99 US cents, down from 73.32 US cents on Tuesday.
On the New York Mercantile Exchange, oil prices fell 60 cents to US$79.23 per barrel and the natural gas contract fell 10 cents to US$2.49 per million BTU.
Gold was down US$15.20 at US$2,364.10 an ounce and copper slipped seven cents to US$4.79 a pound.
The Canadian Press