Linea Mercati Interview 2/8/25
February 10, 2025
Consumer credit balances surge as Americans whip out their plastic
February 10, 2025The New York Stock Exchange closed down on Friday, undermined by fears of a return of inflation that could delay the prospects of a rate cut by the American central bank (Fed).
The Dow Jones fell by 0.99%, the Nasdaq index dropped 1.36% and the broader S&P 500 index lost 0.95%.
“Clearly there were two factors” that pulled prices down, explained to AFP Peter Cardillo, of Spartan Capital Securities, citing “on the one hand, the employment data” and on the other the consumer confidence index.
The unemployment rate fell again in January in the United States to reach 4%, a level considered that of full employment, according to data published Friday by the Labor Department. Analysts expected it to remain unchanged at 4.1%, according to the analyst consensus compiled by Briefing.com.
At the same time, the country continued to create jobs (+143,000), but less than expected by analysts (around 155,000).
“The problem is that we have seen the hourly wage increase”, which is a “concern” for investors “because it was relatively stable in recent months”, noted Peter Cardillo.
“The increase in the average hourly wage (…) bodes well for consumer spending” but “can be interpreted as an indicator of stable inflation that will prevent a further cut in Fed rates”, stressed Patrick O’Hare in a note.
The American monetary institution responds to the dual mission of ensuring both price stability – with an inflation target of around 2% – and full employment.
At its last meeting in January, the Fed opted to leave its rates unchanged, in a range between 4.25% and 4.50%.
Meanwhile, market players have been pessimistic about the decline in consumer confidence, according to an indicator published Friday, the first since Donald Trump’s inauguration.
The index assessing this confidence fell to 67.8% in February, against 71.1% a month earlier (a downwardly revised figure), reaching its lowest level since July 2024, according to the preliminary estimate of the University of Michigan.
Analysts had expected it to be much higher, at 71.3%, according to the consensus compiled by Briefing.com.
“Many consumers seem worried about facing high inflation again in the year ahead,” notes the director of the survey, Joanne Hsu, quoted in the press release.
She refers to the “perception” among respondents that it is “perhaps too late to avoid the negative impact of the customs duties” implemented by Donald Trump.
The investigation was closed on February 4, two weeks into the Republican’s second term, which included imposing 10 percent additional customs duties on products from China.
According to press reports published on Friday, Donald Trump announced to members of the Republican Party his intention to impose “reciprocal” customs duties on many countries, which would constitute an escalation of his trade war.
In terms of indicators, Wall Street is expecting the publication of consumer price indices, producer price indices, and personal sales figures next week.
In this context, on the bond market, the yield on ten-year US government bonds rose sharply to 4.49% compared to 4.43% the previous day at the close.
Elsewhere on the stock market, several results have agitated investors.
The travel booking platform Expedia soared (+17.27%), driven by better than expected performances in the fourth quarter thanks to an increase in bookings.
Amazon fell 4.05% despite reporting fourth-quarter revenue of $187.8 billion and net income of $20 billion, nearly double the year-earlier figure.
Cloud cybersecurity services company Cloudflare jumped 17.76% on a 27% increase in fourth-quarter revenue.
Shares in American video game developer and publisher Take-Two Interactive soared more than 14% after the company released its forecasts for the current year, reaffirming that the sixth installment of its flagship title Grand Theft Auto would be released in the fall.
