Wall Street relapses amid inflation concerns

After two rebounds, the New York Stock Exchange recurred on Wednesday, and investors were once again worried about rising bond yields and the risk of stagflation on the eve of the ECB meeting and next week’s approach from federal banks. Oil surged about 3%, dragging Brent’s barrel over $ 124, but yields on 10-year Treasuries were above the 3% threshold.

Two hours before the closing, the Dow Jones fell 0.81% to 32,910 points, the broad S & P 500 index fell 0.98% to 4,120 points, and the tech and biotechnology stock-rich Nasdaq Composite index fell 0.59%. I got 12,103 points.

The S & P 500’s 11-sector index all starts with circulating stocks and is in the red in the evening. Basic materials (-2.2%), real estate (-2.2%), finance (-1.9%), industry (-1.9)%). Energy (-0.1%) and communication services (-0.2%) worked better.

Investors are fascinated by central banks and bond markets in the aftermath of pessimistic reports from the World Bank, fearing stagflation (low growth and sustained high inflation). Inflation surge. Investors also have JP Morgan’s boss Jamie Dimon, who has issued a “hurricane warning” about the economy, and Tesla’s boss, who anticipates difficult times and plans to reduce the labor force of electric car makers by 10%. Keeping in mind recent comments from Elon Musk.

ECB and Fed face the danger of stagflation

On June 14th and 15th, the European Central Bank will meet with the Monetary Policy Committee this Thursday while waiting for the Federal Reserve Board. We need to confirm the end of the asset purchase program at the end of June and pave the way for the first hike in key interest rates at the July meeting. ECB Governor Christine Lagarde recently pointed out that the deposit rate is currently negative at -0.40%, but should be positive again in September.

For the Federal Reserve, we need to raise the main rate, the federal funds rate, by 0.5 points next Wednesday to stay within the range of 1.25% to 1.50%. U.S. central bank officials have shown that they are ready to halve at least another in July, and if inflation shows no clear signs of easing, it could probably rise again in September. .. The RBA) has conducted a surprise hike of 50 basis points at key interest rates, declaring that inflation has risen significantly and should rise further.

10-year bonds exceed 3%, German government bonds 1.35%

In this regard, the May Consumer Price Index announcement in the US this Friday will be the most followed-up indicator of the week. Economists consensus expects price increases to stabilize at 8.2% or 8.3% over the year, following 8.3% in April and 8.5% in March.

In the bond market, yields tightened again on Wednesday, with 10-year T-Bond yields rising 6 basis points to 3.03% and 2-year T-Bond yields rising 3 bps to 2.76%. became. In the euro area, yields on 10-year German foreign bonds rose 6bp to 1.35%. To be on the safe side, Germany’s “10 years” is in the negative territory, at the end of December 2021 at -0.18%, while the US “10 years” was 1.5%.

In the forex market, prior to the ECB meeting, the dollar index rose 0.17% against a basket of reference currencies to 102.50 points on Wednesday evening, and the euro also rose 0.18% to $ 1.0718. In the COMEX August futures contract, gold rose 0.7% to close at $ 1,865.50 an ounce. Bitcoin was $ 30,113 on Wednesday night, down 4% in 24 hours.

Oil rises and global demand rises despite inflation

Oil markets continue to skyrocket, with US WTI light crude (July futures) barrels rising 2.9% to $ 122.88 in the evening Nymex and Brent North Sea futures rising 2.96% to $ 124.14 in August. became. The course soared despite the announcement of a surge in crude oil inventories in the United States last week.

Instead, investors responded to a sharper than expected decline in gasoline inventories across the Atlantic Ocean. This reflects the unprecedented strong demand for fuel in the United States, with a gallon approaching $ 5 despite rising prices.

China’s oil demand is also expected to continue to grow as the economy resumes from the health blockade in Shanghai and Beijing. But on the supply side, the Ukrainian war and production problems in some countries make the outlook uncertain. On Tuesday, US investment bank Goldman Sachs estimated in a note to clients that Brent would reach $ 140 a barrel in the third quarter, averaging $ 135 in the 12 months following July (so far). Expected to be $ 125).

Janet Yellen calls for financial efforts to complement the Fed’s actions

US Treasury Secretary Janet Yellen said in a Senate hearing on Tuesday that the United States is facing “unacceptable levels of inflation” and that it has adequate finances to help ease inflationary pressures without harming the economy. I asked for a stance. She warned that inflation should remain “high” without a deadline.

US ministers upheld Joe Biden’s planned investment in the 2023 budget, especially to develop renewable energy and reduce the cost of prescription drugs. “Parliament has many ways to reduce the cost burden on households,” the minister also pleaded in front of the Senate Finance Committee. Yellen will also hear from the House of Representatives this Wednesday.

Value to follow

Campbell’s Soup (+ 2.1%), an American food group specializing in soups, sauces and biscuits, is gaining popularity on Wall Street. The group has certainly released better-than-expected quarterly results, and in the process is raising estimates of annual sales. This group benefits from rising prices and sustained demand. For Fiscal Year 2022, we now expect organic growth in the range of 1-2%, compared to the previous guidance in the range of -1% to + 1%. Revenue for the third quarter, which ended in early May 2022, reached $ 2.13 billion. In comparison, the year-ago quarter was $ 1.98 billion and the consensus was $ 2.05 billion. Net income attributable to the Group for the quarter was $ 188 million (62 cents per share), compared with $ 160 million in the year-ago quarter.

American alcoholic beverage player Brown-Forman (+ 4.4%) announced revenue of $ 3.93 billion, up 14%, with a 17% organic expansion. Operating profit increased 3% to $ 1.2 billion. Diluted earnings per share fell 7% to $ 1.74 due to the tax increase. The company expects continued growth in 2023, despite global macroeconomic and geopolitical uncertainties. With a strong portfolio of brands and strong consumer demand, Brown-Forman expects net organic sales growth in the mid-single digits. Given the net effects of inflation and the elimination of EU and UK tariffs on US whiskey, the group expects a slight increase in gross profit. Based on these forecasts, operating profit is expected to grow by a single digit of nearly 5%. The effective tax rate for fiscal year 2023 is expected to be 22-23%.

Moderna (+ 2.4%) today provides new clinical data on candidate bivalent Covid boosters targeting Omicron, mRNA-1273.214 (including mRNA-1273 (Spikevax)) and vaccine candidates targeting Omicron variants. Announced. An additional immune dose of 50 micrograms of mRNA-1273.214 achieved all preliminary specifications, including excellent antibody response (8-fold increase). Booster doses are generally well tolerated and, according to the laboratory, had side effects comparable to mRNA-1273 at the same dose. Moderna CEO St├ęphane Bancel is pleased with these preliminary data. He expects longer protection against mutations in concerns about this booster, which is the main candidate for the fall booster dose. Data and analysis will be submitted to regulatory agencies in light of the expected availability this summer.

Novavax (+ 7%). The FDA’s advisory board has recommended a group of coronavirus vaccines for use in adults. Therefore, Americans who were not confident in the vaccines available from Pfizer / BioNTech, Moderna, or Johnson & Johnson may probably find a more attractive fourth possibility.

Western Digital (-3.4%) fell to Wall Street, but the group is considering a variety of strategic options, including the possibility of splitting flash memory and hard disk activity claimed by Elliott Management of the Activist Fund last month. Announced. .. David Geckerer, Managing Director of the Group, specifically mentioned opening up capital for “flash” activities, as suggested by Elliott, “we are proactive in a wide range of strategic and financial alternatives. We are working on it. ” Elliott Management owns 6% of Western Digital’s capital. Activists believe that Western Digital’s unit dedicated to flash memory is worth $ 17 to $ 20 billion.

Twitter (+ 1%). Elon Musk has placed a $ 44 billion bid to acquire a social media network and has suspended his proposal because Twitter does not provide clear information about bots and fake account ratings. , Still cloudy. According to Reuters, the uncertainties surrounding the acquisition have suspended funding for the acquisition. Meanwhile, Twitter reports that it has achieved the highest growth ever, with an ambitious goal of reaching a record high of 13 million new users in the second quarter …

Tesla (+ 1.7%). China’s group BYD is preparing to supply Texas automakers “immediately” with batteries, an executive at a company said in an interview with China’s national television.