Wall Street falls after worrying US indicators
August 2, 2024
Linea Mercati Interview 8/5/24
August 6, 2024On Friday, after the publication of worse-than-expected employment figures, the Nasdaq had already entered correction territory, losing 2.43% to 16,776.16 points. A correction implies a loss of 10% since the most recent peak.
The Dow Jones had lost 1.51% to 39,737.26 points and the broader S&P 500 index had lost 1.84% to 5,346.56 points.
On the stock market side Monday morning, Apple lost 5.08%, Nvidia -6.77% and Tesla -5.72%.
For Peter Cardillo of Spartan Capital, the market rout is “the result of a combination of factors, between the fear of a slowdown in the American economy and the disengagement of the carry trade”.
Hedge funds are getting rid of their “carry trade”, which consisted of borrowing yen at low rates to invest in risky assets, such as Nasdaq growth stocks.
But now that the yen is strengthening and the BoJ has opened the door to rate hikes, “money is flowing out of the stock market, particularly in Japan,” Mr. Cardillo noted as the Nikkei tumbled 12.4% at the close on Monday.
Wall Street indices began to falter sharply on Friday after July employment figures showed the unemployment rate rising to 4.3% from 4.1%. Job creation slowed to 114,000 from 179,000 in June.
“You have to keep in mind that the job creation data has still been positive,” Peter Cardillo said.
CFRA’s Sam Stovall also said, “investors have adopted a ‘shoot first, ask questions later’ mindset.”
“Concerns about a recession and the Japanese market falling into correction territory in a matter of days are causing panic among investors,” the analyst added in an interview with AFP.
He also noted that the news that Warren Buffett has sold half of his stake in Apple since the second quarter, boosting his cash reserves rather than shares, was making the market nervous.
During its results presentation, the Berkshire Hathaway group (-3.43%) revealed that it had sold 49% of its shares in the Apple company, after having already sold 13% in the first quarter.
On the stock front around 14:20 GMT, the eleven sectors of the SP 500 were all in the red, starting with information technology (-4.74%), discretionary spending (-3.66%) and communication services (-3.18%).
Banking stocks were not doing much better (-2.80%).
The action of the Kellanova group, manufacturer of breakfast waffles and snacks, was however sought (+13.25%) while the giant of chocolate bars, Mars (unlisted) would target a takeover that could amount to 30 billion dollars, according to the Wall Street Journal.
On the bond market, borrowing rates of government debt securities sank to the lowest in more than a year for ten-year rates (3.76%), reflecting a flight to safety, while the price of bonds rises when their yield falls.
