Nervousness in the Wall after the Fed decisions

LAST UPDATE: 21:36

Key Wall Street indicators are reacting nervously to the Fed’s decision to raise interest rates – for the second time this year – by 50 basis points, as it intensifies its efforts to tame galloping inflation that continues to move close to the 40-year high.

Nervousness has prevailed since the beginning of today, with key indicators trading mainly on negative ground until US Treasury Secretary Janet Gellen told The Wall Street Journal, among other things, that a “smooth landing “of the US economy despite the aggressive rise in interest rates planned by the Fed.

The initial reaction of Wall Street to the Fed announcements was slightly upward, but then the key indices fluctuated with the S&P recording continuous sign fluctuations. The Dow Jones is currently up 124.46 points, or 0.38%, at 33,253.25 points, while the broader S&P 500 is up 13.50 points, or 0.30%, at 4,186 points. The technological Nasdaq is moving at the opposite pace, falling by 15.22 points or 0.11% to 12,566.52 points.

In addition to raising its interest rates by half a percentage point, the Fed announced – as expected – the “quantitative tightening” of its balance sheet, which due to the financial support measures it provided to address the economic impact of the coronavirus pandemic almost jumped to $ 9 trillion.

Analysts and economists estimate that Powell will use milder rhetoric in his speech after the Fed announcements, compared to the recent time when Federal Bank officials are talking about the need for more aggressive moves, because there are fears that the A rapid tightening of monetary policy could undermine the recovery of the US economy, even leading to a recession.

“With the tightening of economic conditions ahead of the Fed’s decision on interest rates, the Fed could be more lenient,” Saxo Bank’s strategic analysis team said in a note to its clients, according to Saxo strategists. “Since the last meeting of the Fed, the yield on US 10-year bonds has climbed over 3%, for the first time since 2018, the dollar has recorded a rally of 5%, the S&P 500 has slipped by 8.74%, while hedge funds report has fallen to a low of 1.5 years “.

A softer rhetoric from the Fed could fuel a short-term rally for tech and stock stocks that have been hit hard in recent times, Saxo analysts say. However, they added: “We have to keep in mind that the long-term outlook is still very downward, in the medium and long term, as the Fed will deduct $ 1 trillion a year from the system and the economy is expected to slow.”

The discouraging economic data announced earlier on the US trade deficit and new jobs also point in this direction.

In particular, the US trade deficit jumped 22% in March and exceeded $ 100 billion for the first time in history, reflecting the increased appetite of consumers for foreign goods, but also higher prices for oil and other products in the middle of surge in inflation. In particular, the trade deficit increased to $ 109.8 billion from $ 89.8 billion last month. Analysts’ average estimates in a Wall Street Journal poll put the deficit at $ 106.7 billion.

Meanwhile, US private-sector job growth was lower than expected in April. In particular, US companies added another 247,000 jobs last month, according to the ADP Research Institute. Analysts’ average estimates in a Reuters poll put the figure at 395,000 last month.

On the business “front”, Lyft’s title is 30% “dip”, after the announcement of the quarterly results, with its figures exceeding the market estimates but with its estimates for profits and sales disappointing the analysts.

On the other hand, Airbnb shares gained more than 6% after the announcement of better-than-expected results, while the Starbucks title jumped more than 7%, announcing quarterly results depending on estimates due to rising costs and inflation. with the CEO of the company however noting that the demand “record” helps to accelerate the development plans of the company.