“Between Hawk and Dove”
Uncertain Fed depresses sentiment on Wall Street
October 19, 2023, 11:09 p.m
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US investors were once again glued to Fed Chairman Powell’s lips. But he continued to avoid a clear pendulum swing. They want to observe the effect of the interest rate increases. This does not mean that the issue of an increase is off the table, but it has not become more likely either.
The speech by US Federal Reserve Chairman Jerome Powell has dampened the mood on Wall Street. The Dow Jones Index the standard values closed 0.8 percent lower at 33,414 points. The technology-heavy one Nasdaq fell around one percent to 13,186 points. The broad one S&P 500 lost 0.8 percent to 4278 points. “Powell continues to straddle the middle line between hawk and dove. The Fed is still not sure it has done enough,” concluded market strategist David Russell of TradeStation.
The chairman of the US Federal Reserve said at an appearance in New York that was eagerly awaited by the financial markets that patience was needed to see what effect the rapid interest rate increases that had taken place since the beginning of last year had. However, the analysts were calm. “While Powell remained open to future rate hikes, he did not change his view that the Federal Reserve will leave interest rates unchanged at its next meeting and probably for the rest of the year,” said Chris Zaccarelli of Independent Advisor Alliance.
At the Bond market Investors turned their backs on government bonds in view of the prospect of interest rates remaining high. Prices fell, but yields continued to rise. The ten-year US Treasuries temporarily yielded 4.996 percent after 4.902 percent the previous day. This meant that the return was close to the five percent mark that was last exceeded in 2007. “Will the five percent mark ultimately be exceeded? I think the answer is yes, and that will in turn lead to even more volatility,” said Russell Hackmann, president of financial services firm Hackmann Wealth Partners. The interest rate on US government bonds is not only an important factor for the government’s refinancing costs. Many consumer and business loans are also based on this.
At the Oil market Nervousness continued to be felt in view of the ongoing Middle East conflict. The sharp rise in prices driven by the fighting between Israel and radical Palestinians has partially come to a standstill. “But the market is still under upward pressure due to geopolitical tensions,” added Tina Teng, analyst at CMC Markets. The North Sea oil grade Brent and the light US grade WTI each rose in price by more than two percent to $93.47 and $90.58 per barrel (159 liters), respectively.
The one considered a safe haven gold On the other hand, the price of the precious metal has increased by more than six percent since Hamas’ attack on Israel on October 7th. On Thursday, the price of the precious metal was 1.3 percent higher at $1,973 per troy ounce.
Economic data without a clear indication
Current economic data pointed in different directions and was of little help in finding direction. While a surprisingly significant decline in initial jobless claims reflected a continued good employment situation, the Philadelphia Fed index for October recovered less than expected and remained in negative territory. However, traders emphasized the importance of the labor market for inflation and the weekly labor market data showed that the labor market remained tight and therefore the risks of inflation remained high. The labor market data should therefore be seen as a signal that key interest rates are likely to remain high. However, weighed down by high interest rates, sales of existing homes fell to their lowest level since 2010 in September.
Companies were alienated by the declining profit margin Tesla the investors. The US electric car manufacturer is feeling the effects of the self-initiated price war. Tesla stocks lost 9.3 percent. A disappointing quarterly result also depressed the share price Blackstone, which lost 7.9 percent. The asset manager’s profits fell more than expected in the third quarter due to a decline in sales in its real estate business.
They also flew out of the depots Lam Research. The chip supplier’s shares fell by 6.3 percent after a disappointing outlook for sales in the second quarter. The papers from Netflix However, they jumped by 16.1 percent. The fight against the unauthorized sharing of passwords is helping the streaming service to achieve a significant increase in user numbers. At the same time, the group announced price increases for some of its subscriptions. Were also in demand AT&T with a price increase of 6.6 percent. Booming new customer business has brought the US telecommunications group a quarterly result that exceeded expectations.