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The case is updated.
With Fed chief Jerome Powell’s speech on Thursday, the “world’s most important interest rate” settled in the landscape close to five percent. On Thursday, the final quotation ended at 4.99 percent. On Friday, the average interest rate was 4.94 per cent.
And the fact that investors can get a risk-free return of five percent over the next ten years is clearly evident in the stock market. On Friday, the central US key indices follow Thursday’s fall. They started with a slight drop, then it increased. At the same time, the fear index Vix is also climbing further.
With the major banks’ reports in recent days, the US stock market has done away with the first programmatic chapter of the earnings season. But the high interest rates now seem to overshadow investors’ and managers’ interest in the current earnings season.
Because that’s the interest rate everyone is talking about. Several comment that Powell left the door open for further rate hikes at Thursday’s session.
– Jerome Powell puts all possibilities for a new rate hike on November 1 to bed. But in order not to let the market go completely off the rails, he is still keeping the door open for more rate hikes, Peter Boockvar, who publishes the Boock Report, told Bloomberg after Powell’s speech on Thursday.
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The ten-year-old rises – the two-year-old falls
While the ten-year bond is establishing itself in the 4.9 range, the two-year bond shows that the interest rate market expects short-term interest rates to fall somewhat. From the peak on Thursday, a couple of hours before Powell gave his speech, the two-year-old has now fallen 20 basis points. The peak of 5.26 percent was the highest level since 2007. When the American stock exchanges opened on Friday, the interest rate was 5.10 percent.
Chief analyst Erik Bruce (former) at Nordea with his colleagues chief economist Kjetil Olsen and analyst Joachim Bernhardsen. (Photo: Didrik Linnerud) More…
In a weekly summary, the economists Erik Bruce and Joachim Bernhardsen in Nordea write that the ten-year US government interest rate reached new heights this week, and that the rise since the beginning of September is “as much as 0.85 percentage points”, which are levels last seen in 2007:
– Strong key figures from the US economy contribute to the upswing. On Thursday, Fed chief Powell emphasized in a speech that the latest data indicated progress towards the Fed’s goals of price stability and maximum employment. The central bank can proceed cautiously with regard to interest rate increases, according to Powell, and the market therefore still believes that the interest rate peak has most likely been reached, the Nordea economists write.
According to an overview from Bloomberg, there is now only a slight preponderance of economists who believe in interest rate increases at the next three interest rate meetings at the Fed. Already in March, there is clear support for interest rate cuts.
They point out that the US economy has coped with interest rate increases better than feared:
– However, it strengthens the belief that the Fed must keep interest rates high for a long time to prevent too much pressure in the economy. The ten-year interest rate is now rising more than the two-year interest rate. It may be an expression of belief in a higher long-term interest rate. A ten-year interest rate should, among other things, reflect expectations for the key interest rate over the next ten years, the Nordea economists write.
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Puts the result season in the shade
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According to Bloomberg, 74 percent of the 86 first quarter reports from the 500 companies included in the S&P 500 index had exceeded analyst expectations. The news agency points out that there have nevertheless been no major price reactions, apart from Tesla, and that share prices have moved more collectively. It is interpreted to mean that major macro news, such as the rise in interest rates, the price of oil and unrest in the Middle East, affects the stock markets.
When the Nasdaq and NYSE stock exchanges closed, the central indices ended as follows on Friday:
The broad S&P 500 index fell 1.3 percent. The industrial companies’ Dow Jones fell 0.9 percent. The technology exchange Nasdaq’s main index had a price drop of 1.5 per cent.
Tesla’s share decline increased throughout the day, and ended with a fall of 3.7 percent. As a result, the share price has fallen by almost 18 per cent in just three days. Tesla reported quarterly figures on Wednesday, and although they were within analysts’ expectations on several points, selling pressure has affected the stock over the past two days.
Nvidia, with its three-day fall, has been another of the key stocks this week, and the share price rose as the stock markets opened. But the upturn turned into a downturn, and the share price fell 1.7 per cent.
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2023-10-20 21:00:00
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