The floor of the New York Stock Exchange (AFP/ANGELA WEISS)
The New York Stock Exchange returned to the green at the end of the morning in New York against all expectations, after having plunged at the opening in reaction to a higher than expected inflation indicator.
After having lost up to 1.88% in the first exchanges, the Dow Jones rebounded and posted up to +2.45%, before slowing down. Around 4:15 p.m. GMT, it was up 1.77%.
The big gap was even more pronounced for the Nasdaq index, which dropped to 3.15% at the start of the session, before rising to +2.28%. It remained up, by 1.01%, around 4:15 p.m. GMT. The broader S&P 500 index took him 1.42%.
“There was a sell-off in stocks and bonds, prices went down to (multi-year) lows, but there weren’t enough sellers,” LBBW’s Karl Haeling commented.
The S&P 500 and the Dow Jones briefly fell to their lowest level in nearly two years, while the Nasdaq approached the symbolic threshold of 10,000 points for the first time since July 2020.
Initially, investors reacted to the publication of the CPI consumer price index, which rose 0.4% over one month in September, more than the 0.3% expected by economists.
Over one year, inflation is 8.2%, lower than August’s 8.3% but higher than the forecast of 8.1%.
As for so-called underlying inflation, ie excluding food and energy, it reached its highest rate over one year for 40 years, at 6.6%.
“These figures will keep the Fed (US central bank) in an aggressive tightening position,” Kathy Bostjancic of Oxford Economics concluded in a note.
Operators have recalibrated their forecasts and now give a 62% probability of two further hikes of 0.75 percentage points each in the Fed’s key rate in November and December, compared to 7% just a week ago.
Investors even see the key rate at 80% going down to at least 5% by March 2023, an ultra-minority scenario a month ago.
After the publication of the CPI, bond yields, which move in the opposite direction to bond prices, soared. The yield on 10-year US government bonds rose to 4.07% for the first time in 14 years and the 2-year rate reached 4.52%, a 15-year high.
For Karl Haeling, the fact that the VIX index, which measures investor nervousness and market volatility, did not rise much higher than the day before “was a sign that there was no panic. ( …) Investors already have such a defensive positioning…”
© 2022 AFP
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