New York (AFP) – The New York Stock Exchange opened lower on Wednesday, again concerned about a widespread economic slowdown and jitters ahead of the chairman of the US central bank (Fed) before the US Congress.
Around 2:05 p.m. GMT, the Dow Jones lost 0.70%, the Nasdaq index, with a strong technological composition, lost 0.08%, and the broader S&P 500 index, 0.49%.
After a sunny session on Tuesday, the indices were back in the red, “a change in direction which seems linked to a fundamental concern about the growth outlook, put aside yesterday in favor of a technical rebound”, commented, in a note, Patrick O’Hare, of Briefing.com.
Most of the barometers of risk aversion, from the VIX volatility index to the price of sovereign bonds, thus rose at the start of the session.
The yield on 10-year US government bonds eased sharply, to 3.12%, against 3.28% the day before, with bond rates moving in the opposite direction to their price.
All eyes are on the US Senate Banking Committee, before which Fed Chairman Jerome Powell is hearing from 3:30 p.m. GMT. The official will also be heard tomorrow by the Finance Committee of the House of Representatives.
“We know what he’s going to say. He’s going to try to look like he’s fighting inflation by all means,” said Gregori Volokhine of Meeschaert Financial Services.
“He is accountable to the representatives of the people. As he cannot say that he prevented inflation from happening, he must have a very, very tough speech vis-à-vis his fight against inflation “, continued the manager. “And obviously that’s not what the market wants to hear.”
For analysts at Schwab, “conviction in equities is lacking as inflationary pressure forces central banks to tighten monetary policy, fueling inflation fears.”
The latest central banks to tighten the screw, the Czech National Bank and the Central Bank of Iceland, which respectively raised their key interest rate on Wednesday by 1.25 percentage points (to bring it to 7%) and 1 point (to 4.75%).
“Members of the (senator’s) committee will riddle the chairman of the Fed with questions about how he intends to curb inflation without tipping the economy,” predicted Patrick O’Hare. “At this point, the market is far from convinced that he can do it.”
“The tightening of financial conditions (…) should continue to moderate growth and help to better balance demand and supply,” said Jerome Powell in his opening remarks on Wednesday.
The Fed “expects that in two years, the unemployment rate will rise to 4.1%, but this is not enough” to bring inflation close to its target of 2%, estimates Gregori Volokhine. “And how can he say he is continuing to fight full employment when what he is going to do is going to help destroy jobs? But he has no choice.”
In tune with the price of black gold, oil stocks unscrewed on Wednesday, from ExxonMobil (-3.16%) to Marathon Oil (-5.74%). The heavy weather that blew in general, on all raw materials, also affected the mining company Freeport McMoRan (-7.33%) or the steelmaker US Steel (-2.70%).
The tobacco company Altria plunged (-8.88% to 41.64 dollars) after the government’s decision, announced on Tuesday, to reduce the level of nicotine in cigarettes sold in the United States, which would, according to experts, limit the smoker addiction.
Another blow for the group from Richmond (Virginia), the American agency which notably regulates the marketing of tobacco and its affiliated products is preparing to ban the sale of Juul products, a giant of electronic cigarettes in which Altria owns 35% of the capital.
Revlon continued its mad ride (+42.41% to 8.63 dollars). After having melted by 73% after the publication of the first information related to its bankruptcy filing, which took place on Thursday, the cosmetics group saw the value of the title more than quintuple, boosted in particular by the influx of private investors, decided to speculate on the action.
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