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International stock exchanges generally responded positively the US Federal Reserve’s interest rate decision yesterday. The central bank will reduce its support purchases faster than previously signaled and allows for six interest rate increases over the next two years to overcome galloping inflation. The decision is characterized as a surprising and sharp upward adjustment of the previous estimates.
At the same time, more investors are preparing prolonged unrest, something the interest rate jump in the US, omicron infection, China crises, sanctions, inflation and supply chaos are to blame.
The three leading indices on Wall Street opened on Thursday plus, but then moved in different directions. The Nasdaq index was at one point down close to three percent, but recovered somewhat towards the end of the trading day.
This is what it looked like at closing time:
- Industrial-heavy Dow Jones, which consists of 30 hand-picked supposedly important stocks, fell 0.09 percent
- Nasdaq Composite, which is dominated by technology companies, fell 2.47 percent
- The S&P 500 index, which consists of 500 of the largest listed companies in the United States, fell 0.88 percent
Rising interest rate increase
Some companies that have done well in periods of higher interest rates are doing well today, writes CNBC and mentions the major banks JPMorgan Chase, Citigroup and Bank of America, which all rose around three percent.
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Others struggle more. Technology-dominated Nasdaq is burdened by Tesla, among others, which ended down over five percent. The share price has fallen significantly in the last month, including after several divestments from founder and major shareholder Elon Musk.
Adobe ended down more than ten percent after the company announced that they will probably do worse than expected this year, while Apple, the world’s largest company measured in market value, fell 4 percent.
Graphics card maker Nvidia fell 6.8 percent, while stock trading platform Robinhood fell nearly seven percent. The rental company Airbnb also did not have a good day, and ended up seven percent.
One of the exceptions is the telecom and technology company AT&T, which became one of today’s winners with an increase of about 7 percent. The company was upgraded earlier this week by Morgan Stanley from sales to hold.
Increases the pace
The US Federal Reserve (Fed) announced on Wednesday night Norwegian time that it has decided to cut 30 billion dollars of the monthly support purchases in the month ahead, which means that the support purchases can be completely phased out in March, towards the middle of 2022 earlier. This gives room for maneuver to increase the key policy rate from zero.
The median estimate among the members of the Fed’s Monetary Policy Committee is now three interest rate increases in 2022 and three in 2023, it emerged in the financial forecasts that the bank publishes at the same time as its interest rate decision. (Terms)Copyright Dagens Næringsliv AS and / or our suppliers. We would like you to share our cases using a link, which leads directly to our pages. Copying or other use of all or part of the content may only take place with written permission or as permitted by law. For additional terms look here.
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