(New York) The New York Stock Exchange ended sharply lower Friday after a second straight session sawtooth, depressed by the slowdown of US consumers, concerned about inflation.
Updated yesterday at 5:41 p.m.
The Dow Jones lost 1.34%, the NASDAQ index fell 3.08% and the broader S&P 500 index fell 2.37%.
After a rollercoaster day on Thursday, the New York market had continued its technical rebound from the previous day at the start of the session.
But the momentum was quickly snuffed out by several macroeconomic indicators, including retail sales, which came out flat in September when economists were hoping for a 0.2% rise over one month.
“High inflation and rising interest rates have forced consumers to be more discerning in their purchases,” said Oren Klachkin of Oxford Economics.
But investors mostly noted data from the University of Michigan consumer confidence survey.
Although the general index came in above expectations in October, at 59.8 points against 58.6 in September, American consumers now see inflation at 5.1% over a one-year horizon, against 4.6% in September.
On average, respondents expect inflation to be 2.9% in the next 5 to 10 years, compared to 2.7% in September.
“THE thing the Fed (US central bank) doesn’t want to see is rising inflation expectations,” commented Quincy Krosby of LPL Financial. However, “they have evolved in the wrong direction. »
The acceleration of inflation expectations is a phenomenon feared by central bankers because it is likely to create an inflationary spiral that prolongs the rise in prices over time, or even aggravates it.
Therefore, “we expect the Fed to continue its aggressive campaign” to raise interest rates, and that “the road to price stabilization will be difficult for the markets”, according to Quincy Krosby.
Operators continue to recalibrate their monetary policy expectations and now see the Fed’s key rate close to 5% next April.
Bond rates firmed up on Friday, with the prospect of monetary tightening even more marked than expected. The yield on 10-year US government bonds was 4.02%, down from 3.94% the previous day.
For Art Hogan, of B. Riley Wealth Management, this rise in bond rates has contributed to cooling the markets.
For Maris Ogg, of Tower Bridge Advisors, investors will be particularly attentive, in addition to macroeconomic data, to company forecasts during the earnings season which has just begun.
If they are cautious “and the stocks do not move or rise, it will show that we are not far from the end of the bear market” (bear market), according to the analyst.
No less than four major US banks released their quarterly results on Friday before market.
The results of JPMorgan Chase (1.66% to 111.19 dollars), above expectations whether for turnover or net profit, were welcomed. CEO Jamie Dimon nevertheless warned: “There are significant headwinds directly facing us”, be it inflation, the ongoing monetary tightening or the war in Ukraine.
Its rival Citigroup (+0.65% to 43.23 dollars), like JPMorgan Chase, took advantage of the dynamism of retail banking to offset the deceleration in the activities of investment banks, handicapped by a tightening of credit conditions and uncertainty about the trajectory of the economy.
Both its turnover and its net profit were down, but above expectations.
Another banking establishment to publish its results on Friday, Wells Fargo (+1.86% to 43.17 dollars) did better than expected on its turnover, partly due to the rise in interest rates, which allows it to restore its margins.
As for Morgan Stanley (-5.07% to 75.30 dollars), which does not have a retail bank, it suffered from the bad climate for market activities and published a turnover quite significantly below forecasts analysts.
The Albertsons supermarket chain fell (-8.45% to 26.21 dollars) after the announcement of its takeover by its competitor Kroger, for 24.6 billion dollars, debt included.
The price of the title was almost aligned with the price proposed by Kroger, ie 34.10 dollars, from which will be deducted an exceptional dividend of 6.85 dollars, which brings the amount actually offered per share to 27.25 dollars.
The marriage will give birth to a juggernaut of mass distribution, with nearly 5,000 stores and 710,000 employees.
In Toronto
The Toronto Stock Exchange lost nearly 300 points on Friday, dragged down by losses in the base metals and energy sectors, while the major US indices fell even more significantly.
The Toronto floor’s S&P/TSX Composite Index erased 287.28 points to end the session with 18,326.35 points.
“I think investors are digesting the inflation numbers and interest rate increases that are happening globally. And that leads to some volatility,” said Anish Chopra, managing director of Portfolio Management.
Between the drop in home sales and the decline in manufacturing sales, two data points released Friday, it is clear that the economic environment is slowing in Canada, said Mr. Chopra.
Normally, a slowing economy would signal interest rate cuts, but that’s not on the menu this time, he noted; inflation is still lingering, as warmer-than-expected data out of the United States showed on Thursday.
Canadian inflation data for September will be released on Oct. 19, and the market still expects inflation to persist as interest rate hikes take time to trickle down to the economy, Ms. Chopra.
As more companies release their quarterly results, investors will be particularly interested in the pressure they are feeling due to various economic headwinds, Chopra said.
“Over the next few weeks, investors will be looking at earnings from companies in both Canada and the United States, to see what the impact of inflation is on costs, as well as the ability of companies to increase their price. »
He added that investors would also be looking to see what impact the central bank’s interest rate hike has had on corporate earnings and balance sheets.
In the currency market, the Canadian dollar traded at an average rate of 72.17 cents US, down from 72.43 cents US on Thursday.
In an environment where the economy is slowing and energy prices are high, Mr. Chopra believes that the demand for energy could be affected in the weeks and months to come.
The Canadian Press