Away from the lows of the day, the closure on the Wall in the echo of the Fed

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The Wall Street index closed on Wednesday with losses for the second consecutive session, but far from the lows of the day, with the investors “digesting” the intention of the Federal Reserve for a more aggressive tightening of its monetary policy, which revealed the minutes of the session. of March.

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Fed officials, as the minutes showed, are favoring more aggressive moves by the Federal Reserve to tackle galloping inflation, which is hovering above 40 years. In particular, at their last meeting, they discussed the plan to reduce the Fed record balance sheet at a faster pace than the central bank did last time.

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In this context, they plan to reduce its balance sheet by $ 95 billion a month, after a quarter of “adjustment”, most likely starting in May, but have not yet made their final decision.

At the same time, Fed officials showed in March more determined to support interest rate hikes by 50 basis points if inflation remains high or worsens, instead of the 25 basis points increase that is the Federal Bank’s usual practice.

The publication of the minutes temporarily further strengthened the sales of shares, widening the losses for the key indices, but with the market restricting its fall towards the end of the session.

“I think the change in tone over the last month is significant, both in terms of the Fed’s rhetoric and the overall market expectations,” Matt Stucky, senior portfolio manager at Northwestern Mutual Wealth, told MarketWatch.

However, he added, Wall Street had largely discounted an initial, rapid cut in the Fed’s balance sheet of $ 1.2 trillion. up to 1.5 trillion. dollars, compared to just $ 600 billion about four years ago.

At the same time, the market seems to have discounted the largest increase in interest rates, at least in May, which according to some analysts explains the fact that despite the Fed’s aggressive rhetoric, losses were reduced at the close of the day.

The strong intra-conference pressures on the market today are due, however, to growing concerns that accelerating monetary tightening to reduce inflation could “kill” the economy.

Concerns have also been raised by Deutsche Bank, Wall’s first major bank to address the risk of recession, with economists predicting that US and European economies will shrink over the next two years.

Fears of a possible recession were also expressed by some analysts and investors last week when the yield on the US 2-year bond slightly exceeded the 10-year yield, temporarily reversing the yield curve.

This phenomenon is considered by many as a warning sign of a possible economic downturn, although some analysts stress that it is not a very good timing tool for investors.

The yield curve has meanwhile returned, as the 10-year yield is again higher than the 2-year yield, at 2.630% versus 2.546%.

Indicators – Statistics

Despite the higher intra-conference losses, however, the indices finally completed the trading away from the low day.

In particular, on the board, the Dow Jones industrial average closed 144.67 points or 0.42% lower, although it managed to lose up to 300 points, finishing at 34,496.51 points.

The broader S&P 500 lost 0.97%, closing 43.97 points lower at 4,481.15 points.

The Nasdaq recorded a new strong fall, closing at 13,888.82 points, 2.22% or 315.35 points lower.

In the blue chips index, the picture was completely divided, with 15 shares closing higher and as many more with losses. The biggest gains were recorded by the securities of UnitedHealth (+ 2.70%), Johnson & Johnson (2.60%) and Walmart (2.32%), while the strongest losses were recorded by the shares of Salesforce (-4.44%), Microsoft ( -3.66%) and Visa (-3.13%).

Source: Capital

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