Stocks in New York: Turned negative – fear of interest rates has investors firmly in its grip again | 05/02/22

NEW YORK (awp international) – On Wall Street, early gains on Monday evaporated again after Friday’s price slide. Economic data on the mood in industry had only briefly supported the most important indices before the significant rise in yields on the bond market once again fueled investors’ fears of interest rates. Ten-year US bonds have now returned three percent for the first time since December 2018. The general mood among investors is therefore still characterized by caution before the interest rate decision by the US Federal Reserve is on the agenda for Wednesday.

The leading index Dow Jones Industrial recently fell by 1.33 percent to 32,540.04 points and thus reached the level of the end of February. The market-wide S&P 500 lost 1.42 percent to 4073.12 points. The tech-heavy Nasdaq 100 was down 0.90 percent to 12,739.19 points.

When the Fed announces its monetary policy decisions on Wednesday, investors are currently expecting a 0.5 percentage point hike in the key interest rate. “But beyond that, investors are waiting for new insights into the additional steps to be taken to combat inflation,” said the experts at the private bank Metzler, looking beyond the concrete decisions. According to experts, the Fed is only at the beginning of a rate hike cycle. in an environment of rising interest rates, stocks become less attractive than fixed income securities.

Economically, the corona lockdowns in China and the ongoing war in Ukraine remain major international concerns for investors. This is one of the reasons why fresh economic data from the USA was particularly in focus on Monday. The mood in US industry surprisingly deteriorated in April, as shown by the unexpected decline in the ISM Purchasing Managers’ Index for April. This barometer for US industry, which serves as a gauge for overall economic growth, is still well above the growth threshold of 50 points.

The conclusion of the analyst Ralf Runde from the Landesbank Hessen-Thüringen was rather positive: “The important, national mood barometer of the US industry is solid, although the expectations were clearly missed.” Since the index is still clearly in the expansion zone, the interest rate expectations regarding the Fed will probably not be shaken this week. However, it is questionable whether the interest rate fantasies that go beyond this will be pushed through again. “A whole series of sharp rate hikes is already priced in,” the expert continued.

Among the weakest stocks in the S&P 500, Moody’s shares fell about 6 percent. The financial rating provider missed expectations with its profit in the first quarter and reduced the annual outlook.

In contrast, Activision Blizzard’s shares were among the biggest winners in the index with a plus of almost three percent. Here it was pointed out that investor legend Warren Buffett now holds ten percent of the computer games group.

Shares of Buffett’s holding company Berkshire Hathaway fell 2.7 percent. This only kept the operating profit constant at the start of the year due to larger burdens in parts of the insurance business. Increased claims for damages at primary insurer Geico weighed on the results in this area. In contrast, the reinsurance business, the rail freight company BNSF, as well as manufacturing companies and retail trade were doing better than a year ago./la/he

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