Wall Street closes in the red, recession fears backdrop

The New York Stock Exchange ended Thursday down, concerned about the risks of recession linked to the Fed’s monetary tightening as the earnings season begins.

The Dow Jones index lost 0.76% to 33,044.56 points as did the broader S&P 500 index to 3,898.85 points while the tech-heavy Nasdaq dropped 0.96% to 10,852.27 points. .

The indices oscillated in the red zone throughout the session, except in particular for energy-related stocks (+1.11%) while oil prices rose, boosted by the prospect of a recovery in Chinese demand.

But “a + fear + factor remains in the background, fueled by concern that the Central Bank (Fed) will raise rates too sharply” and cause a recession, Peter Cardillo of Spartan Capital told AFP.

Lael Brainard, Governor of the Fed, although known to be more “a dove” than a “hawk” when it comes to monetary policy, reiterated in a speech that the Central Bank should “stay the course” on high rates to curb the ‘inflation.

Even though inflation has slowed, it “remains high and it will take time to bring it down to 2%. We are determined to stay the course,” the official said.

The day’s macroeconomic indicators were mixed with a new sign of weakness in the real estate market, the first victim of the rise in rates.

Housing construction fell 1.4% in December over one month after already falling 1.8% the month before, a figure revised down sharply. In addition, a rebound is hardly in sight since building permits, which give an idea of ​​future starts, are also down 1.6%.

The labor market, on the other hand, is not yet showing any obvious signs of slowing down, despite announced workforce reductions in the tech sector. Weekly jobless claims were lower last week at 190,000 (-15,000).

– Long battle –

Moreover, the country has entered what risks being “a long battle” between Democrats and Republicans, in the words of Peter Cardillo, over the debt ceiling.

If the American State, the world’s largest borrower, still has the financial means to pay its obligations until June, the Treasury, which no longer has the authorization to borrow for lack of a green light from Congress, must take exceptional measures. to make his cash flow last.

“There will be financing in the end, but this long standoff will weigh on the nerves of investors,” commented the Spartan Capital analyst.

On the corporate side, the earnings season started with Procter and Gamble, which is a Dow bet, and whose quarterly results disappointed investors.

The title of the manufacturer of hygiene and care products ended down 2.15% at 142.37 dollars after announcing that it had achieved a turnover of 20.8 billion dollars, 1% less than ‘one year earlier.

This decline is explained by the melting of the volume of purchases, which fell by 6% as a whole, consumers being put off by the increase of 10% on average in the prices of its products such as Gillette razors or Pampers nappies. .

“It weighed on the Dow Jones,” commented Peter Cardillo, adding that investors were “anxious” for further corporate earnings announcements over the next two weeks.

The streaming leader Netflix concluded in a fall of 3.23% to 315.78 dollars pending the publication of its results after the market close.

However, these turned out to be better than expected in terms of subscriber numbers with 230.75 million paying subscribers in the last quarter. The stock rebounded strongly in electronic trading after the close, gaining 3.63%.

Microsoft dropped 1.65% to 231.93 dollars after announcing Wednesday the loss of 10,000 jobs, almost 5% of its workforce.

The latest in a series of big names in tech cutting into their payroll like Amazon, Facebook or Salesforce, Microsoft says it reacts to changes in its customers’ priorities and to their “caution” in the face of recession risks.

Bond yields on 10-year notes rose slightly to 3.39% instead of 3.36%.