A trader at the New York Stock Exchange (GETTY IMAGES NORTH AMERICA/SPENCER PLATT)
The New York Stock Exchange closed sharply lower on Friday on fears of a recession triggered by the brutal monetary tightening underway.
The Dow Jones set a new record low at the end of the year, down 1.62%. It had not completed a session this low since November 2020. As for the Nasdaq index, it lost 1.80%, while the broader S&P 500 index fell 1.72%.
“The market is finally taking the Fed (US central bank) at its word: they are going to cause a recession to fight inflation,” said Chris Zaccarelli of the Independent Advisor Alliance. “This is bad news for markets, and worse for workers and the economy.”
Investors continued to react this way to the Fed’s statement, which on Wednesday raised its rate by 0.75 percentage point, but also signaled that it expected it to rise higher, and for longer, than Wall Street predicted.
On Friday, the market opted to “sell now and ask questions later,” summed up Quincy Krosby of LPL Financial. “We’re going for cash, because volatility and uncertainty are increasing.”
The VIX index, which measures market volatility, thus rose to its highest level in more than three months.
While Wall Street’s three-star indices finished a bit above their lowest levels for the year in the session, “they look like they want to go lower, to the point where all the headwinds are integrated,” according to Quincy Krosby.
The color of the session did not improve, on the contrary, with the publication of the PMI index, which showed a clear upturn in activity in the United States in September.
“Any time we get a better-than-expected indicator, traders anticipate that it will allow the Fed to be even more aggressive on rates,” said Oanda’s Edward Moya.
The atmosphere is all the more pessimistic as no important indicator is expected before next Friday and the PCE price index, whose scope is relativized by the fact that it is late and does not correspond to September, but to August.
Hundreds of shares hit their lowest level of the year on Friday. The technology sector was particularly affected, such as Dell (-2.09%), HP (-1.40%), Intel (-1.96%) or Nvidia (-0.36%), which lost almost two thirds of its capitalization in one year.
But berezine wasn’t limited to technology, with several “old” economy heavyweights also visiting depths not seen since at least this time last year, from Dow Chemical Group (-1.94%) up to the 3M conglomerate (-1.01%), via Visa. (-0.98%), the telecommunications operator AT&T (-1.42%) or Nike (-1.55%).
Also at the lowest level of the year, the courier group FedEx (-3.37% to 149.33 dollars), which published results well below market expectations, a week after a first advance communication. The group has announced a savings plan of 2.2 to 2.7 million dollars per year and an increase in its prices of at least 6.9% on average on January 1.
Boeing was grounded (-5.37% to 131.26 dollars) after the announcement, on Thursday after the stock market, of an amicable agreement with the US market regulator, the SEC, which accused the aircraft manufacturer of having lied about the risks of your 737 MAX aircraft. The transaction provides for the payment of compensation of 200 million dollars.
The semi-wholesale supermarket chain Costco was shunned (-4.26% to 466.40 dollars) despite the publication of a quarterly profit above expectations. The group has seen the cost of its products rise faster than its turnover.
The bond market evolved in a loose order. While the US 2-year interest rate rose again to 4.26%, the 10-year US government bond yield fell to 3.68%, versus 3 .71% of the previous day.
“As long as the 10-year rate goes down, the market should remain stable,” argued Jack Ablin of Cresset Capital. The contraction of this rate reflects, in fact, expectations of a recession in the medium term, and would help limit the tightening of credit conditions in the United States, which would be favorable for the economy and the equity markets.