2022-04-21 22:10
publication
2022-04-21 22:10
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Both the prices of US stocks and bonds fell after comments from the head of the Federal Reserve. The anticipated increases in interest rates are starting to bleed air from the financial asset market.
– I’d like to say, that a 50 bps hike will be on the table during the May Fed meeting – said Jerome Powell during the debate on the global economy organized by the International Monetary Fund. Powell added that “In my opinion, there would be a bit faster action to raise interest rates”.
This means investors must prepare for a 50-point hike in the federal funds rate in May (but that has been known for a long time), but possibly also for a series of 50-point moves at each of the six scheduled FOMC meetings this year. And that would mean that we could end the year with the Fed rate even above 3%, which the market has not expected so far.
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In recent days, other Fed members have rather rejected calls for a faster path of interest rate hikes. Only the Fed chairman of St. Louis James Bullard said earlier this week that he was open to a rate hike of up to 75 basis points in May.
As a result, US government bond yields rose again. In the case of 5- and 7-year securities, the yields are already approaching 3%. The profitability of 10Y Treasuries rose to 2.9%. The increase in yields signals a decline in the bond market price.
Rising market interest rates mean problems with maintaining the exorbitant valuations on the US stock market. The growing risk-free rate means that the basic model of stock pricing (ie the DCF method) returns a lower and lower valuation of the company with the same expected financial parameters (revenues, CAPEX, profits, etc.). And that’s what we saw on Wall Street on Thursday.
The Dow Jones went down 1.05% and ended the day at 34,792.76 points. The S & P500 fell by 1.48%, going down to 4,393.66 points. The Nasdaq dropped by 2.07% and finished with 13,174.65 points. The course of the Thursday session itself is also significant. After the boom opened, all three major indices made a steady downward move without attempting any fight.
Netflix’s stock continued to sell down on individual stocks, down 6.8% today after a mega-drop of 35% on Wednesday. The company lost more than $ 50 billion in market capitalization on Wednesday, and its shares are 65 percent this year. negative, the worst result in the S&P 500 index.
AT&T grew by 3.5 percent. Earnings per share were 77 cents per share in the first quarter, and the market was expecting 75 cents a share. Philip Morris shares grew 2 percent. The tobacco group’s profit per share after three months of this year was $ 1.50, 6 cents above the consensus.
So far, over 17 percent. companies included in the S&P 500 index showed their financial results for the first quarter of 2022. Of this number, 81 percent. companies surpassed analysts’ expectations. The real accumulation of the results season on Wall Street will take place next week.
KK / PAP
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