(New York and Toronto) The three main indices of the New York Stock Exchange lost more than 2% Wednesday, after a session shaken by the Fed, which diagnoses a weakening of the recovery, and speculative agitation.
Posted on January 27, 2021 at 8:09 am
Updated at 17:33
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According to final results, the index of flagship stocks Dow Jones dropped 2.05% to 30,303.17 points. The tech-heavy NASDAQ fell 2.61% to 13,270.60 points, while the S&P 500, the most representative of the US market, fell 2.57% to 3,750.77 points.
The Toronto Stock Exchange recorded its worst session in three months, erasing the impressive gains it had made since the start of 2021.
Toronto’s S & P / TSX Composite Index plunged 354.98 points to end the session with 17,424.43 points. This is its lowest closing price since December 14. The market started the year on a high, climbing 3.5% in its first week of 2021.
“The mood underlying the market is largely one of caution and risk aversion today, and investors are taking a break after a long period of gains, but nothing in particular can stop the sale, ”observed Candice Bangsund, portfolio manager at Fiera Capital.
She noted that the investor hiatus comes as uncertainties persist about COVID-19 and its economic impact on pricing high stock valuations.
Although she does not share the view of some regarding the formation of a stock market bubble, Mr.me Bangsund estimates Wednesday’s pullback could herald a correction of around 10%.
“If you look at investor sentiment (and) the technicalities, the recovery looks a bit stretched and sentiment is approaching euphoria,” she said in an interview.
“These are usually the preconditions for a short-term pullout, so I wouldn’t be surprised to see some profit taking. “
However, Mme Bangsund continues to believe that the long term outlook remains extremely bright, especially later in the year.
Nine of the Toronto Stock Exchange’s eleven sectors fell on Wednesday, particularly those in materials, industrials, consumer discretionary and financials.
In the currency market, the Canadian dollar traded at an average rate of 78.28 cents US, down from its average rate of 78.73 cents US the previous day.
On the New York Commodities Exchange, crude oil rose 24 cents to US $ 52.85 per barrel, while gold fell US $ 6 to US $ 1,844.90 per ounce . The price of copper, for its part, dipped 6.2 cents US to end the day near US $ 3.56 a pound.
“Long road before a full economic recovery”
As of the publication in the early afternoon of the press release from the Fed’s Monetary Committee, noting a “weakening” in employment activity in recent months, the indices, which were already moving in the red, widened their losses .
“A long way to go before a full economic recovery”, “Highly uncertain prospects”: Jerome Powell, President of the Central Bank tempered the ambient optimism, hammering that the good health of the world’s largest economy remained dependent on the developments of the pandemic and the pace of vaccination.
“The Fed has acknowledged that the economic recovery has weakened over the last two months of last year,” said Paul Ashworth of Capital Economics.
The Central Bank “has maintained its language according to which asset purchases will continue at the current rate until further substantial progress has been made,” Wells Fargo analysts also noted, stressing that the qualification of such future progress “Lacked clarity”.
Speculative push
The stock market was already off to a bad start at the start of the session as investors seemed “grappling with the recent surge in valuations exacerbated by growing speculation,” said Schwab.
They were concerned about the frenzy around stocks like that of video game distributor GameStop (+ 134% at closing at $ 347.51) or that of AMC Entertainment Holdings (+ 301% to $ 19.90).
GameStop, a channel rather in difficulty, has been the subject for five days of a battle between hedge funds that had bet on the fall of the title and stock marketers who defend it.
This rise in securities “pushes hedge funds” who had bet on their decline, “to have to liquidate positions and raise funds” to cover their bets, explained Gregori Volokhine of Meeschaert Financial Services. Asked about these speculative surges, the boss of the Fed refrained from commenting.
On the macroeconomic front, the International Monetary Fund (IMF) has also issued a warning signal once again, during its global economic forecasts, on a possible “risk of a market correction”.
Boeing dropped almost 4% after painful results with the pandemic, showing a loss of $ 11.9 billion in 2020. Microsoft, despite huge results the day before, stagnated (+ 0.25%).
After the close, the good results of the heavyweights of technology hardly changed the game. Despite making $ 11 billion in profits last quarter, Facebook was pegging 0.18% after the close after finishing down 3.51%.
Apple and its record turnover of more than 111 billion dollars remained stable in electronic exchanges after the closing bell.
Tesla, which posted a weaker than expected profit in the fourth quarter, saw its stock drop 4% after the close.
In the bond market, the 10-year yield on Treasuries gave ground to 1.0093% from 1.0347% on Tuesday.
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