Fears of Restrictive Monetary Policy in the US Keep Dow Jones Industrial Index in Check

Indexes in This Article: Dow Jones Industrial, NASDAQ 100, S&P 500

Persistent fears of a restrictive monetary policy in the USA have kept the US leading index, Dow Jones Industrial, in check on Thursday. The stock market barometer barely moved, continuing the consolidation of the past three trading days, and closed at 33,946.71 points.

However, there was some positive news for the technology stocks on the Nasdaq stock exchange, which had fallen sharply the day before. The NASDAQ 100 rose by 1.18 percent to 15,042.32 points, leaving the 15,000 mark behind again. The market-wide S&P 500 also saw a slight increase of 0.37 percent, closing at 4381.89 points.

Traders have cited statements by US Federal Reserve Chairman Jerome Powell as the reason for the subdued market sentiment. Powell confirmed that there are signs pointing to further increases in key interest rates by the end of the year. He mentioned that two more rate hikes this year are likely and that it will take a long time to bring inflation down to the desired 2 percent target.

These statements have prompted investors to reconsider the optimism sparked by the recent US interest rate pause. Janet Mui, head of market analysis at RBC Brewin Dolphin, stated that recession risks are arguably higher if interest rates stay higher for longer, but risk assets don’t reflect that. In Europe, interest rates are also spiraling upwards, with the central banks of England, Norway, Switzerland, and Turkey raising their key interest rates.

In company news, Amazon’s shares rose by 4.3 percent following rumors of interest in Ocado by technology companies from the USA. The British “Times” reported the rumors without citing any further source. Amazon was also brought into play as a possible buyer. Ocado, which offers software and hardware for online grocery retailing, saw its shares jump a third in London.

On the other hand, Boeing was the biggest loser in the Dow, with a discount of over three percent. The aircraft manufacturer’s largest supplier, Spirit Aerosystems, suspended production due to a strike by unionized workers, causing shares in Spirit Aerosystems to lose almost ten percent.

Despite a downgrade by Morgan Stanley, Tesla’s shares turned positive by two percent. The bank removed the buy recommendation for the electric car manufacturer, but analyst Adam Jonas emphasized that Tesla is still “a must in every electric car portfolio.”

In the forex market, the euro fell to $1.0955 in trading, while in the European currency business, it had risen above the 1.10 dollar mark. The European Central Bank (ECB) had set the reference rate at 1.0985 US dollars.

US government bonds came under pressure on the bond market, with the futures contract for ten-year bonds (T-Note Future) losing 0.48 percent to 112.77 points. The yield on ten-year Treasuries rose to 3.80 percent.

Overall, the market sentiment remains cautious due to the persistent fears of a restrictive monetary policy and the potential impact on interest rates. Investors will closely monitor further developments and statements from central banks and policymakers to gauge the future direction of the markets.

By Benjamin Krieger, dpa-AFX

Why are investors reevaluating their optimism in light of the recent interest rate pause

T also noted that the market may have overreacted to Powell’s comments.

Overall, the Dow Jones Industrial, NASDAQ 100, and S&P 500 indexes were affected by the cautious market sentiment caused by fears of a restrictive monetary policy. The Dow Jones Industrial remained relatively stagnant, while the NASDAQ 100 experienced a positive rebound after previous losses and the S&P 500 saw a slight increase. Traders attributed this market sentiment to statements made by Fed Chairman Jerome Powell, who indicated the possibility of further interest rate increases this year. Investors are now reevaluating their optimism surrounding the recent interest rate pause.