Monday, May 23

Wall Street ends sharply, destabilized by the Fed

The New York Stock Exchange ended sharply lower Wednesday, bristling by the increasingly firm tone of the US Central Bank (Fed), which wants to tackle inflation resolutely.

The Dow Jones dropped 1.07% to 36.952.65 points and the extended S&P 500 index, 1.94% to 4,797.70 points, but it was the Nasdaq that suffered particularly, dropping by 3.34%, to close at 15,586.29 points.

Worried about the rise in bond rates, investors started the session on tiptoes, in dispersed order.

Technology stocks weighed down the entire market, with the exception of the Dow Jones, which ended up being dragged into the red, too.

The turning point was the publication of the minutes of the last meeting of the Fed’s monetary policy committee, which show a desire to tackle inflation head-on.

The members of the Fed have indicated, in unequivocal language, that they now plan to raise the institution’s key rate earlier and more often than expected.

In addition, it is now a question of starting to reduce the Fed’s balance sheet immediately after the first rate hike, which took operators by surprise.

“The market did not like this passage,” commented analysts at in a note.

It was the bond market first that rallied, with the benchmark 10-year US government bond rate jumping above 1.70% to a nine-month high.

Already misguided, the Nasdaq plunged, losing more than 3%.

“Securities that have high multiples (share price versus earnings) usually take a hit when it looks like the Fed is about to hike rates,” said the investment manager at the management company Bokeh Capital Partners.

This is the case for many stocks that posted cheeky gains in 2021, such as Alphabet (-4.68%), Tesla (-5.35%), or Apple (-2.66%).

The nuggets of the new economy introduced on the stock market with fanfare in 2021 were also pounded, like the online financial services company SoFi (-6.31%) or the virtual platform Roblox (-6.95%) .

The stars of cryptocurrencies and the blockchain also took it for their rank, investors abandoning, for example, Coinbase (-6.36%), or the virtual currency mining company Riot Blockchain (-12.06% ).

A few rare stocks withstood this bad wind and allowed the Dow Jones to limit its losses, in particular stocks in the medical sector such as Merck (+ 2.43%) or Walgreens (+ 0.97%).

“The market will sell massively for a few days, the time to digest” the publication of the Fed, announced Kim Forrest. “People freak out. It happens.”

Another star of the 2021 promotion of IPOs, the electric vehicle manufacturer Rivian (-11.22% to 90.01) has taken the full brunt of a series of announcements from its competitors.

General Motors (-4.56% to 62.74 dollars) on Wednesday presented an electric version of its own flagship pickup, the Silverado, at CES, the tech show in Las Vegas.

Stellantis also unveiled a major partnership with Amazon, which provides for an order from the manufacturer of “thousands” of electric utility vehicles per year from 2023.

Rivian, which went public in mid-November, has so far based part of its popularity with investors on an order for 100,000 electric vans by Amazon.

Nice gallop also for AT&T (+ 2.22% to 26.21 dollars), whose general manager communicated good numbers of telephone subscriptions and indicated that the sale of WarnerMedia (content subsidiary) to Discovery (-1.12 % at $ 26.45) was running its course as expected.

The leader also indicated that the HBO channel and the HBO Max streaming platform had 73.8 million subscribers worldwide at the end of 2021.

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