Volatility on Wall Street after Fed rate decision
Wall Street The exchanges are mixed this Wednesday, following the notable gains Tuesday’s session. The New York stock market reacts with the sale to the decision of the European Commission. Federal Reserve (Fed) to raise interest rates 25 basis pointsup to 4.50%-4.74%as expected, and anticipate “further increases”..
The American market ended a very positive first month of the year, particularly with regard to the Nasdaqwhich climbed to nearly 11% (this is the most bearish index in 2022), followed by the S&P500 (+6%), which recorded its best january since 2019; and for the Dow Jones (+2.8%).
WAITING FOR THE FEDERAL RESERVE
The website Fed monetary policy meeting is the key event of the day. Investors expect the pace of monetary tightening to slow to 25 bps, but will also be watching the Fed Chairman’s press conference, Jerome Powell and possible “hints” as to the maximum level that interest rates will reach.
“What will determine the reaction of the markets are the following questions: How long will you keep raising rates US central bank officials; at what level he will place themi.e. what the terminal rate will be; and How long are you going to keep them at this level? before they start to go down,” Link experts point out.
Analysts are also betting that “the Fed will raise its official rates by 25 basis points one or two more times, until the process is complete. Thereby, the terminal rate would be close to or slightly below 5%”.. Where investors’ expectations diverge seriously is over how long it will stay at this level. The “optimists”, a large part of the market, expect the Fed to start cutting rates before the end of the year.
As for Powell’s statements, the market is convinced that. he will use a harsh tone again and reiterate its message that the ” since a while “. “If that’s the case, and if Powell assumes there won’t be an interest rate cut this year, bond markets and equity markets are likely to react negatively, which will ‘support’ also the high level of overbought prices in many asset classes,” says Link.
ECONOMY AND COMPANIES
On the corporate scene, the earnings season continues. This Wednesday, it will be the turn of PurposeFacebook’s parent company, which will publish its accounts after the market closes. Thursday, also after closing, it will be the turn of Apple, Alphabet there Amazon.
Another company in the limelight is Snapwhich plunged more than 11% in Wednesday trading after the company reported fourth-quarter revenue below analysts’ estimates.
From an economic point of view, the ratio of private job for the month of January prepared by the consulting firm ADPbefore the official employment report which will be published this Friday. The figure was 106,000 jobsagainst 235,000 in December.
It is also known that the ISM and manufacturing PMIwhich remained in contraction territory and below 50 points in January.
The analysts of Oxford Economics point out that the first reading of the year “is not encouraging and signals a bad start to the year for factories.“.
” We anticipate more pain in the coming monthsbecause restrictive monetary policy and the past tightening of financial conditions are holding back manufacturing activity. The pandemic-induced boom in demand for goods is decidedly in the rearview mirror, and a challenging macroeconomic environment will make factory production will decline by 2023.“, they add.
In other markets, oil West Texas down 2.97% ($76.53) and the Brent fall of 3.01% ($82.89) after the OPEC meetingmeeting, during which no new production developments were announced.
For his part, the euro appreciated by 0.37% ($1.0902), and the ounce of gold is up 0.16% ($1,948). Furthermore, the U.S. 10-Year Bond Yield falls to 3.475% and the bitcoin loses 0.20% ($23.065).