Wall Street recedes and the Fed bends its muscles

The New York Stock Exchange lost ground Wednesday evening as the Federal Reserve issued a solid statement on inflation. This suggests that key interest rates will be raised faster and stronger than expected. Markets are also wary of a new heat wave for oil on the eve of the EU-NATO summit. This is consistent with the announcement of new Western sanctions against Russia on Thursday.

Two hours after closing, the Dow Jones fell 1.12% to 34,419 points, the broad S & P 500 index fell 0.92% to 4,470 points, and the Nasdaq Composite Index, rich in technology and biotechnology stocks, fell 0.95% to 13,974. It became a point. Nine of the 11 S & P 500 sector indexes are integrated, with the exception of energy (+ 1.5%) and utilities (+ 0.03%). Consumer discretion (-1%), telecommunications services (-1%), treasury (-1.7%) and technology (-0.9%) lost all or part of the previous day’s profits.

The action “meme”, GameStop, stands out with a 12% jump, with president Ryan Cohen taking a stake in a video game distributor and regaining confidence in the files of shareholders operating on social networks. .. Adobe (-9.6%), on the other hand, had the problem of poor results.

Earlier that day, the European market was also revised, with Eurostocks 50 at 1.45%, DAX 30 at 1.3% in Frankfurt and CAC 40 at 1.17% in Paris. In Asia, the Nikkei rose 3% in Tokyo and the Shanghai Composite Index rose 0.3%. In Japan, the market is speculating on additional stimulus after Congress approves a record budget.

The Fed promises to act “quickly” to curb inflation

In the bond market, yields fell slightly on Wednesday, but the Fed’s rate hike in May was at least halved and could continue to rise by the same magnitude in June, the highest level since May 2019. It remains close to. The 10-year T-Bond rate dropped 5 basis points (bp) to 2.32%, and the US “2 years”, which reflected the evolution of the short rate, returned from 4 bp to 2.12%, but about 0.73. %was. At the end of December last year. In Europe, the eurozone benchmark 10-year German foreign bond yield fell 5 bp to 0.45%.

The Federal Reserve began its rate hike cycle moderately on March 16 with a quarter-point hike, but its chairman Jerome Powell was much tighter on Monday and “quickly” to control inflation. “I said I needed to act. He added that the US central bank can “act more aggressively by raising the federal funds rate by more than 25 basis points at one or more meetings,” as needed.

Cleveland Fed Governor Loretta Mester said Wednesday that “the market can handle the strong initial cycle rate hikes that coincided with the balance sheet cut.” Mester expects the federal funds rate to be around 2.5% this year before it is raised further in 2023. He said in a speech at John Carroll University.

Even Mary Daly, the boss of the San Francisco Federated Bank, is considered the Fleet’s most “dove” official and admitted on Wednesday that a 50 basis point rate hike may be needed to stop price increases. rice field.

On Tuesday, St. Louis Fed boss James Bullard, the only person who voted in favor of raising half-points last week, said in an interview with Bloomberg Television that the Fed was “aggressive in raising interest rates to more than 3%. I request it. ” Year.

Faced with this mass fire from the Federal Reserve Board, financial market operators have adjusted their expectations for a year-end rate hike. Goldman Sachs is currently expecting the Fed to raise interest rates by 50 basis points at its May and June meetings.

In Europe, money markets expect ECB rates to rise by 50 basis points by the end of the year.

Brent barrel rises above $ 120

Oil prices (a key component of inflation) rose sharply again on Wednesday, but the EU embargo on Russia’s oil continues to be debated. Barrels of US light crude WTI (May futures contract) rose 5.7% to $ 115.02, and barrels of Brent crude oil from the North Sea rose 6.2% to $ 121.80 (May contract). .. Opinions remain controversial as to whether the EU will impose an embargo on Russia’s oil and gas imports, according to Reuters.

Crude oil prices were also supported by the announcement last week of a 2.5 million barrel decline in US inventories. The news that crude oil exports from the Caspian Pipeline Consortium Terminal in Kazakhstan in the Black Sea were suspended after the storm also contributed to energy supply concerns.

In the context of new uncertainty, Friday recovered 0.8% on Wednesday to $ 1,937.30 an ounce (Comex April contract). On the currency side, the dollar index peaked in the evening at 98.63 points (+ 0.14%) against a basket of reference currencies, while the euro fell 0.19% to $ 1.1006. Bitcoin fell 1.2% in 24 hours to about $ 42,109, according to the Coindesk site.

Intense diplomatic activity is being prepared in the West before the Ukrainian conflict. There, the EU Summit is scheduled for Thursday in Brussels, and there are also NATO and G7 Summits. US President Joe Biden is scheduled for Wednesday in Brussels, where he will attend a G7 summit with NATO and meet with European leaders. Western allies are also expected to announce new sanctions on Moscow.

In US “macro” news, new home sales in February were disappointing at 772,000, while January consensus was 810,000, 788,000. Last January’s reading was 801,000, which has been revised lower. Rising mortgage rates seem to be starting to put pressure on the real estate sector.

Value to follow

With General Mills (+ 2.8%) rising, Wednesday’s US Agrifood Group raised its profit and sales forecasts throughout the year, thanks to higher prices and strong demand for animal feed. General Mills achieved virtually stable $ 4.5 billion in revenue and an internal growth rate of 4% in the just-finished third quarter. Operating profit was down 1% to $ 815 million. Adjusted operating profit fell 6% in constant currency. Diluted EPS rose 13% to $ 1.08 and adjusted EPS rose 2% in constant currency to 84 cents.

Throughout the fiscal year, intrinsic growth is currently expected to be 5%, but adjusted operating profit in constant currency is expected to grow from -2% to stable. Finally, adjusted annual EPS is expected to be stable or up + 2%.

Adobe stumbled 9.6% on Wall Street in various predictions. However, in the quarter that ended in the first quarter, the California software group, known for InDesign, Photoshop, and Acrobat products, exceeded market expectations. Quarterly adjusted profit was $ 3.37, but the consensus was $ 3.34, a previous year’s level of $ 3.14. Revenue was $ 4.26 billion, slightly higher than expected from $ 3.91 billion in the previous year. However, the guidance reflects intensifying competition. Adobe expects revenue of $ 4.34 billion in the second quarter, while consensus was $ 4.4 billion. Adjusted earnings per share is expected to be $ 3.3, compared to a consensus of $ 3.35.

The company also predicted that the war in Ukraine would stop all new product sales to Russia and Belarus, reducing annual revenues by $ 75 million.

GameStop (+ 12%) doesn’t say the last word on Wall Street. The value of the former Star of WallStreetBets is once again experiencing very breathtaking stock market activity, but from a strict basic point of view, the last account in the US video game distribution chain is $ 147.5 million. Marked by a net loss of $ 1.94 per share, fourth quarter compared to revenue of $ 80 million ($ 1.23 per share) in the year-ago quarter due to increased operating expenses.

The title is euphoric on Wednesday with the announcement that GameStop president Ryan Cohen of Billionaire has acquired 100,000 shares of the group. Almost 12% of the capital will be the president of the “activist” who is driving distributors towards online commerce. Cohen purchased these shares through investment firm RC Ventures at prices ranging from $ 96.8 to $ 108.8. He currently owns a total of 9,101,000 GameStop shares.

Boeing (-2.9%). One of the two black boxes of China Eastern Airlines 737-800, which crashed in a mountain in southern China on Monday, was discovered.

Western Digital (-1.5%). Kioxia Holdings, in collaboration with Western Digital, plans to build a new factory for manufacturing flash memory chips in northern Japan. Investment could exceed $ 8 billion, according to Reuters sources.

Intel (+ 0.27%) and Micron (-4.3%) continue to be monitored, but leaders of the two groups today called for increased support for semiconductor manufacturing in front of the US Senate Trade Commission. I am.