The New York Stock Exchange opened sharply lower on Thursday, sounded by a higher-than-expected US price index, which raised fears of an even stronger-than-expected monetary tightening by the US central bank (Fed).
Around 2:10 pm GMT, the Dow Jones was down 0.66%, the Nasdaq index lost 1.79%, and the broader S&P 500 index lost 1.10%. The S&P 500 briefly dipped to its lowest level in nearly two years, while the Nasdaq approached the symbolic 10,000 point threshold for the first time since July 2020.
The CPI consumer price index emerged in September at 0.4% in one month, more than the 0.3% expected by economists.
In one year, inflation is 8.2%, lower than the 8.3% in August but higher than the forecast of 8.1%.
“Inflation data supports aggressive monetary policy until prices show clear signs of decelerating over an extended period”reacted, in a note, Rubeela Farooqi, of High Frequency Economics.
“Not only will the Fed raise rates by 0.75 percentage points next month, but there is now a chance they will raise them again by 0.75 percentage points in December.”commented Chris Zaccarelli, Independent Advisors Alliance, while operators so far counted on half a point.
“The report shows that the pressure (on prices) in services and on health costs persists”noted Art Hogan of B. Riley Wealth Management, “and stifles any appetite for risk.”“We will have to wait for the close to know how investors are digesting it, but it is clearly not good value for the equity markets.”He added.
As soon as the CPI inflation indicator was released, futures contracts, which predicted a significantly higher opening on the New York Stock Exchange, immediately reversed and plunged into the red.
At the same time, bond yields took off. The 10-year US government bond yield exceeded 4% and reached a new 14-year high of 4.07%. As for the 2-year rate, more representative of investors’ expectations in terms of monetary policy, it rose to 4.52%, the first in 15 years.
The prospect of further tightening of credit conditions weighed on the technology sector, which is heavily dependent on loans to sustain growth.
In contrast
Amazon (-3.27%), Tesla (-3.84%), Meta (-1.48%) or semiconductor manufacturer AMD (-2.11%), the last three at the lowest of the year, are been among the most affected.
But the new economy wasn’t the only victim of this tense start to the session, like DIY chain Home Depot (-2.60%), construction equipment maker Caterpillar (-1.57%) or Boeing (-1.16%).
Pharmaceutical giant Walgreens Boots Alliance managed to recover from stagnation (+ 3.44% to $ 33.04), despite the announcement of an unexpected quarterly loss for its fourth accounting quarter (completed in late August). The market welcomed the group’s increase in forecasts for its US healthcare subsidiary by 2025.
Another glimmer in the dark was the airline Delta Air Lines (+ 2.91% to $ 30.06), which benefited from earnings forecasts well above expectations for the fourth quarter. General manager Ed Bastian said the resumption of attendance is continuing.
Takeaway pizza chain Domino’s jumped (+ 9.11% to $ 329.25) after posting quarterly revenue slightly above expectations, despite a below-forecast net profit.
The world’s largest asset manager, BlackRock (-2.37% to $ 518.50), fell despite a higher-than-expected quarterly net profit. The group saw its assets under management melt by 16% in one year and recorded only $ 16 billion in net positive flows (assets under management deducted from withdrawals).
