Shares fell around the world as fears of a recession resurfaced, with the Federal Reserve struggling to overcome inflation that has proved more persistent and widespread than officials predicted.
The recovery that followed the Fed’s decision faded, with the S&P 500 at its lowest level since December 2020. The high-tech Nasdaq 100 sank 4 percent. Kroger Co. slipped after the grocery company said higher costs hurt margins. Revlon Inc. filed for Chapter 11 bankruptcy, as the supply chain crisis proved the turning point for the debt-laden cosmetics giant.
10-year Treasury yields resumed their rapid rise, rising to 21 basis points to 3.49 percent. They later halved their lead. Bitcoin, which previously added up to 6.1 percent, fell to around $ 21,000 and is heading for its longest loss streak in Bloomberg data since 2010.
Bad economic signals also weighed on sentiment, with US mortgage rates rising more since 1987, increasing pressure on aspiring home buyers and cooling the housing market. New home construction in the United States fell in May, highlighting the impact of ongoing supply chain challenges and falling sales.
Declaring that it is essential to control inflation, Jerome Powell on Wednesday designed the largest rate hike since 1994 and presented the possibility of another huge rise in July. While the head of the Fed tried to soften the blow of the 75 basis point increase by saying he did not expect moves of this size to become the norm, he did admit to the possibility of an economic downturn.
“We are concerned about growth and where the Fed is ultimately leading us,” said Chris Gaffney, president of global markets at TIAA Bank. “Everyone said, ‘Well, the Fed is doing something aggressive, they’re going to be aggressive, they’re going to try to catch up with the inflation curve.’ chasing something they can’t catch? ‘
The S&P 500 now has an 85 percent chance of a recession in the United States amid fears of a Fed policy mistake, according to JPMorgan Chase & Co. Strategists’ warning about derivatives is based on the indicator’s 26 percent drop. during the last 11 recessions and after its collapse in a bear market amid concern over rising inflation and aggressive rate hikes.
A technical indicator of US equities shows the extent of the recent fall, while offering some optimism that will soon come to an end.
The percentage of S&P 500 members trading above their 50-day moving average sank below 5% this week, the lowest level since Covid-19 fears affected stocks more than two years ago. years. Both this sale and the one that reached the markets at the end of 2018, reversed course shortly after seeing a similar share of the shares fall below the technical average observed up close.
More comments:
- “Our Fed’s main starting point is hawks, meaning the Fed will accept the risk of recession to deliver below-trend economic growth,” wrote Dennis DeBusschere, founder of 22V Research.
- “The market got what it wanted, but maybe, just maybe, going up 75 bp in a rapidly weakening economy is not the best idea,” wrote Peter Tchir, head of macro strategy at Academy Securities.
- “Despite their security, it’s not clear to me if the Fed has the tools they say they do to lower prices,” said Jason Brady, chief executive of Thornburg Investment Management.
- “The bandage was not scammed, and in any case, uncertainty about the magnitude of the upcoming moves has increased,” said Neil Campling, head of technology, media and telecommunications research at Mirabaud Securities.
Elsewhere, investors launched European bonds and the franc bounced back after a surprising Swiss-type rise. The pound rose as the Bank of England raised rates and indicated it is willing to trigger larger moves if necessary. Forex traders are betting that the Bank of Japan will offer a political surprise this week.
This week’s key events:
- Bank of Japan policy decision Friday.
- Eurozone CPI on Friday.
- US Conference Board Leading Index, Industrial Production, Friday
Some of the main movements in the markets:
Stocks
- The S&P 500 fell 3.3% at 10:49 a.m. New York time
- The Nasdaq 100 fell 4.1%.
- The Dow Jones Industrial Average fell 2.6%.
- The Stoxx Europe 600 fell 2.6 percent
- The MSCI World Index fell 2.5%.
Coins
- The Bloomberg Dollar Spot index changed little
- The euro rose 0.4% to $ 1.0481
- The British pound rose 0.5% to $ 1.2244
- The Japanese yen rose 0.8% to $ 132.79
Good
- The 10-year Treasury bond yield rose eight basis points to 3.36 percent.
- Germany’s 10-year yield advanced 11 basis points to 1.75%
- The 10-year yield on the UK advanced 11 basis points to 2.58 per cent
Goods
- West Texas Intermediate crude rose 0.3% to $ 115.61 a barrel
- Gold futures rose 0.6% to $ 1,831.30 an ounce