The risk of a further rise in interest rates and the resulting recession continues to hold firmly to US stock markets.
Equity investors have had to go through a lot in the past few months: fears over inflation and the economy caused US stock markets to collapse in the first half of the year, as they had not been in decades.
It fell further on Thursday, even as the significant price losses from early deals were later contained. That could not make much difference in the appallingly weak half-yearly balance sheet – the global S&P 500 index recorded its weakest growth since 1970. The Nasdaq 100 Technology Selection Index was its worst result since 2002.
Towards the end of trading, the leading Dow Jones Industrial index posted a daily negative 0.82 percent to 30,775.43 points. The S&P 500 reduced its loss to 0.88 percent from 3,785.38 points, while the Nasdaq 100 ultimately fell 1.33 percent to 11,503.72 points. In the first half of the year, the three stock barometers recorded significant discounts of 15, 21 and 30 percent.
The risk of a further rise in interest rates and the resulting recession continues to hold firmly to US stock markets. Market traders pointed out that on Wednesday US Federal Reserve Chairman Jerome Powell and his Eurozone and UK colleagues warned in the forum that inflation would last longer. This fueled the debate “that continuing to raise interest rates to fight inflation will eventually lead to a recession,” wrote market strategist Jim Reid of Deutsche Bank.
When prices rise, consumers try to cut back on spending. This is also confirmed by a weaker than expected increase in US consumer spending in May. Moreover, according to revised data, last month’s spending grew slower than before.
Slow buying sentiment was hit on the stock market by carmakers’ shares: Ford, General Motors (GM) and Stellantis lost two and a half to five percent. As a relatively expensive consumer product, cars are often the first to leave private shopping lists. Additionally, along with the increase in interest rates on the capital market, purchase financing becomes more expensive – also for important corporate clients.
Shares of the Walgreens Boots Alliance pharmacy chain fell more than 7 percent, making them the biggest losers on Dow. JPMorgan analyst Lisa Gill commented on the below-expected profitability in the third fiscal quarter.
Corona Constellation Brands’ papers lost almost four and a half percent. The trader justified the losses with the cautious outlook for the second business quarter.
On the other hand, Biontech and Pfizer were among the daily winners with a premium of around five and almost three percent, respectively. The US government is ordering more corona vaccines from both companies on a large scale as part of its planned fall strengthening campaign. It is also about measures to protect against newer variants of viruses such as Omicron, according to Pfizer boss Albert Bourli.
The euro turned positive after easing losses in the US stock markets and recently cost $ 1.0483 in trading in New York. The European Central Bank previously set the reference rate at USD 1.0387.
US government bonds, which are considered a particularly safe investment, benefited from investors’ continued risk aversion: while the ten-year treasury (T-Note futures) contract rose 0.59 percent to 118.20 points, the ten-year yield of securities fell to 2.99 percent, which is the first time in almost three weeks below the three percent mark. (dpa)