Down week for Wall Street, downcast by message from central banks

The New York Stock Exchange ended in the red on Friday, posting a weekly loss for the first time in five weeks for the S&P 500 and eight weeks for the Nasdaq.

Cooled by the strict attitude of central banks towards inflation, the Dow Jones index, down all week, lost 0.65% on Friday to 33,727.43 points. The tech-heavy Nasdaq fell 1.01% to 13,492.52 points and the S&P 500 fell 0.77% to 4,348.33 points.

Over the week, the three indices lost some 2%.

“It’s the ghost of interest rate hikes and the strict message from central banks” that depressed the market, summarized Peter Cardillo of Spartan Capital while putting the decline in indices into perspective.

“The tone of the central banks is the excuse for the decline, but the fact is that the market has risen sharply in the last three months, leading to profit taking,” added the analyst interviewed by AFP.

The week was marked by statements to Congress from Jerome Powell, Chairman of the US central bank (Fed), warning that more rate hikes are expected this year to curb inflation, which has somewhat cooled investors .

Concerns also came from Europe where several central banks have tightened the screws, in particular the Bank of England which surprised the markets by raising rates by half a percentage point to counter the most tenacious inflation of the G7 countries (8.7% over one year).

“There has been constant worry about a potential recession in the United States which has been just around the corner for 18 months. But there seems to be more to worry about in Europe,” summed up Art Hogan of B. Riley Wealth Management.

Several PMI activity indices published on Friday weakened markedly in June, whether in Great Britain, France, the euro zone and even Japan.

These data “indicate that Europe is falling into a deep recession that could spread to other countries and lead to negative economic growth in the United States in the last quarter of this year”, said Jose Torres, economist for Interactive brokers. “Equity markets appeared to price in those fears today, but with additional possible downside risk,” he added.

In the bond market, fears of recession drove down yields, but did not benefit equities. Those on 10-year Treasury bonds eased to 3.73% against 3.79% the day before.

The euro fell against the dollar as oil prices fell further as investors feared for demand.

As for values, Ford lost 1.20%, the Wall Street Journal having mentioned a new wave of layoffs and massive cost reductions at the automaker.

Used-car seller Carmax jumped 10.07% to $86.21, a nine-month high, after better-than-expected first-quarter results. Profit and turnover fell, but less than expected.

Electric vehicle makers Tesla and Rivian lost 3.03% and 4.38% respectively.

Space tourism company Virgin Galactic plunged 18.42% to $4.34 as investors worried the California-based company’s desire to raise more funds by issuing shares will dilute share value existing.

Starbucks skimmed 2.49%. One of the coffee chain’s employee unions is planning a strike action next week in more than 150 stores.