(New York) The New York Stock Exchange opened lower on Thursday, upset by the results considered disappointing by two large American banks, in a market which is preparing for a new revival of the American Federal Reserve (Fed) in its fight against inflation.
Posted at 9:41 a.m.
Updated at 10:23 a.m.
Around 10:05 a.m., the Dow Jones returned 1.94%, the NASDAQ index lost 1.93%, and the broader S&P 500 index lost 1.95%, the latter heading for a fifth session of declines. in a row.
Before the opening, investors received several bad news, first of all the quarterly publications of the banks JPMorgan Chase (-4.60%) and Morgan Stanley (-2.52%).
The two establishments each missed analysts’ forecasts quite clearly, whether for turnover or net profit.
In question, the brake on the investment bank, while 2021 had been a good year for IPOs and mergers and acquisitions.
JPMorgan Chase also saw its result affected by the increase in provisions for bad debts, a sign of a slight deterioration in the economy, while the bank had, on the contrary, released reserves at the same time last year.
“There is a strong possibility of an ‘earnings recession’,” said Adam Sarhan of 50 Park Investments, “and that could drive down” stock prices. “The slowdown started in the real economy, and now it’s showing in the results. »
Today’s macroeconomic indicators did not improve Wall Street’s mood.
New weekly jobless claims rose again to 244,000, a figure above economists’ expectations.
As for the producer price index (PPI) for June, it also came out above forecasts, at 1.1% over one month, against 0.8% expected, which indicates, according to Mahir Rasheed, of Oxford Economics, that there is “more inflation in the pipes”.
The PPI index is, in fact, considered as a leading indicator of the direction of consumer prices.
On Wednesday, the CPI consumer price index for June was 9.1%, well above the 8.8% announced by economists, the highest since November 1981.
Operators, none of whom envisaged this scenario a week ago, now estimate at 83% the probability that the Federal Reserve will raise its key rate by one point at its next meeting, on July 26 and 27, which would be a first since the 80s.
“The Fed is doing everything in its power to slow the economy” and curb inflation, explained Adam Sarhan.
“Investors are now convinced that the mass is said and that the mission, now, is to ensure that the recession will be moderate and brief”, observed, in a note, Craig Erlam, of Oanda.
“The feeling is that the Fed will hike rates aggressively before pulling back in the middle of next year, to stimulate the economy out of recession,” he continued. “But even that idea seems optimistic today. »
After easing on Wednesday, bond rates rose sharply. The yield on the 10-year US government bond stood at 2.99%, against 2.93% the day before.
The 2-year rate soared to 3.24%, well above the 10-year rate. This positive differential between the two maturities, a rare phenomenon considered to herald a recession, was at its highest for 21 years.
The prospect of a Fed still tightening its monetary policy and the rise in bond rates propelled the dollar well above the euro, to a height not seen for nearly 20 years, up to 0.9952 dollar for a euro.
This context was also unfavorable to technology and growth stocks, such as Tesla (-2.39%), Meta (-2.71%) or Cisco (-2.53%).
All values of the Dow Jones fell back, led by banks, JPMorgan Chase (-4.60%) and Goldman Sachs (-4.01%).
The energy sector was also shunned, echoing the drop in oil prices, like Chevron (-3.72%), ExxonMobil (-4.63%) or Marathon Oil (-6.10 %).