WALL STREET DOWN AS FED SIGNALS AGGRESSIVE POLICIES
by David French
NEW YORK (Reuters) – The New York Stock Exchange ended lower on Thursday and gave up initial gains as comments by US Federal Reserve (Fed) chairman Jerome Powell hinted at an aggressive central bank rate hike policy this year.
The Dow Jones index fell 1.05% or 368.03 points to 34,792.76 points.
The broader S&P 500 lost 65.79 points, or 1.48%, to 4,393.66 points.
The Nasdaq Composite, in turn, fell 278.41 points (2.07%) to 13,174.65 points.
A 50 basis point rate hike will be “on the table” at the Fed’s May 3-4 monetary policy meeting, Jerome Powell said, as the US central bank is expected to raise rates several times this year.
With inflation nearly three times higher than the Fed’s 2% target, “it’s appropriate to act a little faster,” the Fed chairman told the International Monetary Fund (IMF) global economic panel. .
“The market is betting at least 50 basis points (ups) in May and June,” said George Catrambone, chief trading officer at DWS Group. “The market expects Fed officials to act aggressively,” he added, citing comments from Jerome Powell and other central bank officials.
These comments confirmed a seesaw on Wall Street, where strong quarterly results, including Tesla’s, had fueled gains in major indices early in the session. The trend on the S&P 500 and the Nasdaq had already changed before Jerome Powell spoke.
Yields on US Treasuries rose, especially on two-year bonds, which are most sensitive to changes in interest rates, which were at a three-year high before declining slightly.
Faced with uncertainty about the potential impact of higher interest rates on their growth, tech giants such as Meta Platforms, Alphabet and Amazon fell.
Netflix fell for the second consecutive session, 3.5%, after reporting its first loss of subscribers in a decade during its quarterly earnings release and warning that the decline could be compounded this year.
The online video giant’s market cap fell below $100 billion for the first time since January 2018.
All major sectors of the S&P 500 fell, including energy, despite the rise in oil, and technology.
The session was not entirely gloomy, however. Tesla thus posted gains (+3.2%) after publishing quarterly results on Wednesday, despite supply chain problems.
Effects related to the aviation sector remained positive. United Airlines and American Airlines were up 9.3% and 3.8%, respectively, after saying they expected profits in the current quarter on a strong recovery in demand.
(French version Jean Terzian)
