Higher inflation indicator | Wall Street case

(New York) The New York Stock Exchange closed sharply lower on Tuesday in a market devastated by a higher-than-expected US inflation indicator that dampened optimism of the past few days and pointed to further monetary tightening that is more brutal than expected.

Posted at 9:19 am
Updated at 4:14 p.m

The Dow Jones fell 3.94%, the NASDAQ index 5.16% and the broader S&P 500 index 4.32%. This is the worst NASDAQ session since mid-June.

The Toronto Stock Exchange fell more than 300 points. The Toronto Floor S&P/TSX Composite Index fell 341.83 points to 19,645.40 points.

“It’s been a crazy day,” commented Greg Bassuk of AXS Investments.

The indices were pushed lower by the release of the CPI price index, which revealed a modest price gain of 0.1% in August, while economists had expected a 0.1% decline. In a year, inflation slowed to 8.3%, but less than the 8.0% the market was expecting.

“Markets were rocked by this poor CPI and reacted accordingly,” said Cliff Hodge of Cornerstone Wealth.

For Oanda’s Edward Moya, investors fear “that they were overly optimistic about the end of the Fed’s monetary tightening cycle” (US Federal Reserve).

“The market is looking at inflation in the wrong direction, which would force the Fed to maintain or even go further on its offensive stance,” noted LPL Financial’s Quincy Krosby.

Operators have now gone so far as to attribute a 34% probability of the Fed raising interest rates by one percentage point at their next meeting on September 21st and 22nd, rather than 0.75 point, a hypothesis that to date no one has considered had drawn .

“The market is worried about the idea that the Fed will drag us into a recession or seize the system by draining it of liquidity,” Quincy Krosby noted.

Additionally, traders saw signs in Tuesday’s report that inflation was taking hold in the US economy, particularly in food prices.

“The problem is knowing how much these high prices are going to weigh on the real economy and consumers,” Greg Bassuk said, to the point where demand is being crushed, which is also being penalized by tightening credit conditions and financing.

The specter of an even tougher Fed boosted bond yields. The US 10-year Treasury yield rose to 3.41% from 3.35% the previous day.

The 2-year rate, more representative of market expectations for monetary policy, rose to 3.78% for the first time in almost 15 years (November 2007).

The prospect of a pricier credit market has torpedoed tech stocks, which mostly need to borrow to fund their growth.

The NASDAQ giants all suffered, notably Apple (-5.87%), Amazon (-7.06%), Alphabet (-5.86%) or Meta (-9.37%), which are at their lowest fell since the first days of the coronavirus pandemic , in March 2020.

All members of the Dow Jones ended in the red and no sector managed to float.

Among the few that emerged, Twitter welcomed (+0.80% to $41.74) after shareholders voted positively at an EGM in favor of Elon Musk’s acquisition, which the entrepreneur has since denounced.

Another stock to hold its own is liquefied natural gas (LNG) specialist Cheniere (+3.07% to $165.67), the largest exporter of American LNG, which is taking full advantage of the gas market upturn and its forecast for raises all year.

Connected exercise bike and treadmill specialist Peloton slipped (-10.32% to $9.91) after announcing the departure of its co-founder John Foley, who is stepping down as CEO. He had already given up his post as general manager in February.

with The Canadian Press

Leave a Comment