WALL STREET OPENS LOWER, BOND RETURNS UP
PARIS (Reuters) – The New York Stock Exchange opened lower Monday as rising bond yields weighed on equities on fears of accelerated monetary tightening in the United States and an economic slowdown in China.
In early trading, the Dow Jones index lost 393.42 points, or 1.2%, to 32,505.95 points and the broader Standard & Poor’s 500 fell 1.3% to 4,065.83 points.
The Nasdaq Composite, which posted Friday’s fifth consecutive week of decline, the longest weekly streak of losses since Q4 2012, is still up 1.4% or 179.61 points to 11,965.05.
Rich in technology stocks, the index is suffering from expectations of interest rate hikes. After US Federal Reserve rates rose 50 basis points last week, most traders expect a further 75 basis point increase in the cost of credit at the central bank’s June meeting in the face of runaway inflation.
U.S. consumer price data for April will be released on Wednesday.
“The markets are focused on long-term interest rates. The higher they rise, the more they fear a recession or stagflation,” explains Christopher Grisanti, equity strategist at MAI Capital Management.
“The fear has grown to the point where we’ve got rid of everything, including the baby with the bathwater as the saying goes,” he adds.
Against this backdrop, Chinese economic data released on Monday only served to increase risk aversion. The country’s exports slowed significantly in April to their lowest pace since June 2020 (+3.9% yoy), while imports remained stable as health measures linked to the COVID-19 revival disrupted production at factories, supply chains and led to a decline in domestic demand.
In value, digital giants such as Microsoft, Amazon.com, Apple, Alphabet, Meta Platforms and Tesla fell 1.5% to 4.5%. The high-tech sector index lost 1.6%.
Ten-year Treasury yields are rising in parallel to 3.12%, having reached a session high since November 2018 at 3.2%.
This will not benefit banks as Morgan Stanley loses 1.5% and the sector index 1.2% as the yield curve flattens and the five-year Treasury yield (3.07%).
On a positive note, cosmetics manufacturer Coty gained 1.3% thanks to the increase in its annual profit forecast.
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(Written by Claude Chendjou, edited by Jean-Michel Bélot)