Wall Street closed lower, surprised by the Fed more violent than expected

Wall Street closed lower, surprised by the Fed more violent than expected



The New York Stock Exchange ended lower on Wednesday, and the US Central Bank (Fed) took it with a more aggressive-than-expected outlook for monetary policy.

The Dow Jones lost 1.70%, the Nasdaq is down 1.79%, and the broader S&P 500 is down 1.71%.

After swinging between red and green, the indicators sank into the red zone at the end of the session, ending at their lowest levels for the day.

The S&P 500 fell to its lowest level since mid-July.

The Federal Reserve raised its key interest rate by 0.75 percentage points on Wednesday, to a range of 3% to 3.25%.

But more than this new twist in the spiral, which economists had expected, Wall Street was surprised by the new expectations of central bankers regarding interest rate changes.

Two-thirds of Fed members see the key rate rise above 4.50% next year, while operators so far see it mostly staying below that limit.

Central bankers in Washington also rule out the possibility of a drop in that rate before 2024, while investors have been counting on easing in the second half of 2023.

Art Hogan of PE commented:

For AXS Investment’s Greg Pasok, the New York market’s reaction to this call from the Fed “illustrates the unease of investors, who are grappling with macroeconomic uncertainty” and “corporate earnings warnings.”

“We could see a continuation of recent trends by the end of the week, with rates and the dollar rising, stocks and risky assets falling, as traders digest the Fed meeting,” said Matt Wheeler of StoneX.

But for Art Hogan, the market also learned from Fed Chairman Jerome Powell’s press conference that the institution will decide its course based on macroeconomic data.

“They have leeway and can be less aggressive if the data calls for it,” said Angelo Corcavas of Edward Jones.

Additionally, to the analyst, if the Fed did indeed chart a higher-than-expected rate trajectory, it was “more severe than it is on the sidelines.” “That doesn’t change the general tone,” that fight against inflation that will go on for many months.

Expect investors to have largely made it themselves since Jerome Powell’s speech in Jackson Hole (Wyoming) at the end of August, which affected stocks and pushed bond yields higher.

In support of his analysis, Angelo Corcavas mentioned the bond market, which calmed things down after an initial inflection immediately after the Fed’s publication.

Thus, the yield on the ten-year US government bond fell to 3.52%, compared to 3.56% the day before.

On the equity front, the slide at the end of the session was underlined by the rating heavyweight, particularly technology stocks, which are struggling with the prospect of tighter financing terms.

Apple (-2.03%), Amazon (-2.99%) and Meta (-2.72%) all lost more than 2%.

The statements of Russian President Vladimir Putin, who announced the partial mobilization of reservists and threatened to use nuclear weapons, helped the defense sector stocks, including Lockheed Martin (-0.09%), Northrop Grumman (- 0.23%) and General Dynamics (-0.40%). to float.

A rare good surprise today, agri-food giant General Mills (+5.72% to $79.72), which posted a higher-than-expected net profit and raised its forecast for its entire fiscal year 2023, which will be completed. At the end of May.

Cosmetics group Coty (+3.21% to $8.04) was also sought after unveiling its strategic plan to double sales of skincare products by 2025.

In the short term, the New York-based company raised its revenue growth target for the first quarter of fiscal 2023, which ends at the end of September.


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