The New York Stock Exchange welcomed with relief the determination of the American central bank (Fed) to curb inflation by raising its key rates sharply on Wednesday.
According to final results, the Dow Jones index rose 1.00% to 30,668.53 points, the S&P 500 gained 1.46% to 3,789.99 points, and the tech-heavy Nasdaq rose 1.00%. 2.50% to 11,099.15 points.
At the end of its monetary committee, the Federal Reserve raised its key rates by 0.75 percentage point, to set them within a range of between 1.50 and 1.75%. This is the strongest monetary tightening since 1994.
“The Fed underscored the seriousness of its mission with its first 75 basis point (0.75 percentage point) rate hike since 1994, moving quickly in anticipation of rising inflation,” Chris said. Low, chief economist of FHN Financial.
“For the first time in years, the Fed is trying to reverse inflation which is already well above its target,” added the analyst.
For Peter Cardillo of Spartan Capital, “the Fed spoke strongly and the market liked that”. “Although the bear market will continue for a while, it has reacted favorably and bond yields have fallen after the sharp rise at the start of the week,” the analyst said.
– Hard or soft landing? –
Fed Chairman Jerome Powell stressed in his press conference that “the economy was still strong and he thought he could achieve a soft landing by shrinking the Fed’s balance sheet and raising rates,” he said. added Mr. Cardillo.
“Personally, I doubt it, I think we are heading for a moderately hard landing,” said the analyst, referring to the slowdown in the economy sought by the monetary authorities to calm the rise in prices.
Inflation peaked at 8.6% year on year in the United States and Jerome Powell assured that the Central Bank was “committed to bringing inflation back to around the 2% target”.
Tom Cahill of Ventura Wealth Management also believes it will be difficult to orchestrate a soft landing, ie avoiding a recession or rising unemployment.
But the market appreciated, he said, the fact that the Fed remains open “to raising rates by 50 basis points or 75 points at the next meeting in July”. “This option is welcome, as the market fears the Fed is overdoing it.”
Ten-year U.S. government bond yields, which move opposite to their price, reacted favorably, easing to 3.29% from 3.47% a day earlier, which was a high since 2011.
The dollar weakened a little after surging to a 20-year high on Tuesday. The Dollar index, which compares the greenback to a basket of other currencies, fell 0.77% to 104.70 points. Against the euro, it was worth 1.0453 dollars for one euro (-0.34%).
For its part, an extremely rare fact, the European Central Bank (ECB) had held an emergency meeting earlier in order to calm the tensions on the differentials in borrowing rates between the countries of the euro zone.
The day’s indicators continued to reflect a US economy shocked by rising prices and crippled by supply chain bottlenecks.
Contrary to analysts’ expectations, retail sales in the United States fell in May by 0.3%, while consumer purchasing power was sharply reduced.
As for manufacturing activity in the New York region, measured by the Fed’s Empire State index, it remained in contraction in June.
Investors fled cryptocurrencies and bitcoin, a risky asset, which slid to 21,566 dollars (-1.82%).
All sectors of the S&P 500, except energy, recovered, with non-essential consumer spending in the lead (+3.02%), followed by the communication sector (+2.36%) and the real estate (+2.33%).
A number of titles, particularly in distribution, which had fallen sharply at the start of the week, rebounded strongly, such as the online car seller Carvana (+ 16.78%) or that of animal food Chewy (+ 8.10%) . Car rental company Hertz, which announced a buyback of its own shares for $2 billion, climbed 5.05% while Avis, on the eve of vacation departures, accelerated 7.94%.
The vaccine manufacturer Moderna was hailed (+5.73% to 128.53 dollars) after a crucial step was taken towards the vaccination of infants and toddlers against Covid-19, with the favorable recommendation of experts for the authorization of its serum as well as that of Pfizer (+ 1.23% to 48.51 dollars).