Wall Street was looking for direction ahead of the Fed

Wall Street was looking for direction ahead of the Fed

The New York Stock Exchange was disoriented on Tuesday, ending in disarray on the first day of a crucial meeting by the US Federal Reserve (Fed), which has promised brutal additional monetary tightening to tame inflation.

According to the final close results, the Dow Jones Index fell 0.50% to 30,364.83 points and the S&P 500 fell 0.38% to 3,735.48 points, the two indices posting their fifth consecutive losing session. The tech-dominated Nasdaq recovered somewhat after the previous day’s sharp drop, rising 0.18% to 10,828.35 points.

“It looks like we’re going to raise interest rates by 75 basis points,” said Quincy Krosby, an analyst at LPL Financial, noting that markets were to blame for the possibility the day before, thanks to Wall Street Journal headlines They drive the stock down sharply.

“Since then, we haven’t seen any signs that the Fed wants to clarify this assumption of a stronger hike,” the analyst said.

“Indeed, if the Fed sticks with a half-percentage-point hike,” as investors had previously expected and as Fed Chair Jerome Powell cabled, “there is a risk for the market to be disappointed,” she noted.

It was the strength of US inflation (8.6% for the year and 1% for the month of May) released on Friday, along with a very depressed consumer confidence barometer, that turned the tide.

“Inflation has increased expectations of an even more aggressive Fed, fueling fears of a recession,” the analysts at Schwab concluded.

The yield on 10-year US Treasuries, which moves counter to its price, rose to 3.47%, a new high since 2011.

The dollar rose again against the major currencies, hitting a more than 19-year high, buoyed by the prospect of a sharp rise in the cost of borrowing. And an expensive dollar is increasingly weighing on the profits of American companies.

The Fed’s Monetary Committee is due to announce its decision at 18:00 GMT on Wednesday, a decision that will be followed by a much-anticipated press conference by Jerome Powell.

“The big question now is how this monetary tightening will affect the economy. And how far will the market bottom out?” noted Quincy Krosby, while the S&P 500, the most representative index of the American market, has fallen into the “bear market” zone or bear market since Monday, equivalent to a loss of more than 20 % since its last peak.

While the Fed can affect demand by raising the cost of money, it has no control over supply, which is currently being hit by supply chain constraints.

“We are particularly disappointed to see that China risks continuing restrictions in Shanghai,” which will further affect the production and supply of products, the specialist from LPL Financial stressed.

Of the 11 S&P sectors, only energy (+0.07%) and information technology (+0.62%) managed to stay afloat. Utilities (-2.58%), consumer (-1.29%) and real estate (-1.06%) stocks led the decline.

In the rating, the titles of the software group Oracle increased by 10.41% to $70.72, better than expected after a quarterly result.

Cryptocurrency platform Coinbase, which fell more than 11% on Monday amid the virtual currency crisis, trimmed its closing losses to -0.83% as it announced Tuesday it would cut 18% of its workforce.

Oklahoma-based oil explorer Continental Resources rose 15%. Shale gas magnate Harold Hamm, already a majority shareholder, has made an offer for the company’s remaining capital for $4.3 billion, which is valued at more than $25 billion.

Express service provider FedEx rose 14.41% to $229.95 after announcing a significant increase in its dividend.