Losses of 2% for the Nasdaq and 370 points for the Dow, against the background of bond yields

Major Wall Street stocks finally moved deep into the “red” on Thursday, as the jump in US government bond yields and statements by the chairman of the Federal Reserve exceeded the optimism that initially created in investors the strong corporate results.

The industrial Dow Jones lost 368.03 points or 1.05%, to 34,792.76 points, with the widest S&P 500 to lose 65.79 points or 1.48%, at 4,393.66, while the technological Nasdaq recorded a fall of 278.41 points or 2.07%, to 13,174.65.

Earlier, the Dow had strengthened by 331 points, while the other two indices recorded gains of more than 1%.

The yield on the 10-year US government bond reached 2.94%, very close to its highest levels since December 2018. The yields on the 5-year and 7-year US bonds briefly exceeded 3%.

The 10-year yield started near 20% in 2022, but has skyrocketed since the US Federal Reserve announced its intention to tighten monetary policy in a bid to curb rampant inflation.

Earlier in the week, the yield on the 30-year US government bond exceeded 3% for the first time since April 2019, a psychological threshold for many investors in view of the Fed moves in the near future.

“While we expect inflation to peak very soon, if it has not already peaked, supply chain disruptions and slow labor growth due to retirement and concerns for Covid could well keep inflation at twice its target. 2% of the Fed “, noted Joseph Kalish, executive at Ned Davis Research.

“As a result, the Fed may need to raise interest rates even above the range of 3.25% – 3.50% that markets expect in a year from now,” he added.

The bond yields came as Fed Chairman Jerome Powell hinted that interest rate hikes in May could be even higher than expected.

The argument for a forward interest rate hike has some basis, he said, noting that An increase of 50 basis points (0.5%) in the Fed key interest rate will be considered at the May meeting.

“I would say the 50 basis points will be on the table at the May meeting,” Powell told the International Monetary Fund (IMF) in Washington on Thursday, attended by European Central Bank President Christine Lagarde and other officials.

Despite the market forecast for a series of aggressive interest rate hikes by the central bank, Fed officials in recent days have dropped the tone, stressing that “dramatic” moves should not be expected.

Analysts, however, find it difficult for the Fed to control inflation without causing financial damage. “It will take a lot of skill, time and luck to get the economy going smoothly,” Mohamed El-Erian, Allianz’s chief financial officer, told CNBC.

The sell-off of the day was very wide, however some individual stocks helped the indices to avoid bigger losses.

Shares in the energy and raw materials sectors were the Achilles’ heel of the market, with Mosaic losing 9.3% and Chevron 4.6%.

Nvidia recorded a significant decline in the broader technology industry, with losses of about 6%, but also Netflix and Alphabet, with a decrease of 3.5% and 2.5% respectively. The share of Warner Bros. Discovery fell 6.8%, after reports that the company will put a “padlock” on CNN +.

Corporate results continued to be under the microscope of investors, with Tesla’s share gaining more than 3% after higher-than-expected quarterly earnings, mainly on the basis of increased vehicle deliveries. The results of Elon Musk’s company were greeted by analysts with rave reviews.

United added about 9% as the airline predicted a profitable 2022. “I have never seen in my career – and I have been in the industry for many years – such an astonishing surge in demand,” said Scott Kirby, CEO of the company. CNBC network and referring to business travel, but also leisure travel.

More than 17% of S&P 500 companies have announced results, with about 81% exceeding analysts’ estimates, according to FactSet.

Of the 30 Dow shares, 8 traded positive and 22 traded negative. The profits were led by those of Dow Inc., Verizon, IBM, while those losses of Salesforce, Chevron, Walt Disney.

Unemployment benefit applications in the US remain low for many years

The number of new unemployment benefits in the US remained at the bottom of many decades this week, with the labor market confirming the strong period in which it is.

In particular, in the week ended April 16, 184,000 Americans applied for unemployment benefits, a number that was marginally reduced by 2,000 from the previous week and slightly higher than the analysts estimate in Reuters for 180,000.

At the same time, the number of applications for extension of existing benefits fell by 58,000 to 1.417 million, remaining at its lowest level since 1970.