Fed Chairman Jerome Powell during a press conference in Washington on May 1, 2024 (AFP/SAUL LOEB)
The New York Stock Exchange ended up divided on Wednesday, after an initial positive reaction to the comments of the Federal Reserve (Fed) which, if it sees little recent progress in the fall in inflation, in any case rules out a future increase in rate.
The Dow Jones index gained 0.23% to 37,903.29 points. The Nasdaq, with its strong technological coloring, lost 0.33% to 15,605.48 points and the broader S&P 500 index lost 0.34% to 5,018.39 points.
The Federal Reserve’s Monetary Committee left rates unchanged at their highest level in 23 years, recognizing, in its press release, a “lack of progress” in recent months towards the 2% inflation objective.
But Fed Chairman Jerome Powell insisted on emphasizing that monetary policy appeared sufficiently “restrictive” over time and that it was “unlikely that the next move on rates would be an increase.”
These comments initially clearly relieved the markets. Briefly the Dow Jones accelerated its rise before returning to more timid progress at the end of the session. “This type of volatility is not exceptional” after comments from the Fed, judged Art Hogan of B. Riley Wealth Management.
For Peter Cardillo of Spartan Capital, a key point “pleased investors”: the Fed has in fact announced slowing down the rate of reduction of Treasury bills on its balance sheet more than expected. This approach amounted to another tool for tightening monetary policy.
The bond market relaxed significantly, with ten-year rates sliding to 4.61% compared to 4.68% the day before.
“They reiterated the fact that inflation is a tough fight but they remain on the same trajectory,” summed up Mr. Cardillo.
– No hawkish turn –
For Karl Haeling of LBBW, the central bank’s comments “did not in any way commit to rate cuts but certainly did not take a hawkish turn either.”
The markets, which just a few weeks ago were full of hope of seeing rates start to fall in June, are now betting instead on September or November, according to the CME Group estimate.
“The changes made to the Fed’s statement were not as strict as they could have been,” said Ryan Sweet of Oxford Economics.
“The Fed did not take the opportunity to adopt a hawkish tone in its statement, suggesting that rate cuts this year are still on the table,” the analyst added.
In terms of company results, investors welcomed the performance of Amazon which tripled its quarterly profit thanks to its “cloud” (remote computing) branch. The stock rose 2.29% to $179.
The microprocessor manufacturer AMD (-8.91%), on the other hand, disappointed by announcing weaker forecasts than expected for the current quarter.
Super Micro Computer (SMCI), maker of servers used with artificial intelligence, reported lower-than-expected results, complaining of being short of some components. The stock, which has tripled in value since the start of the year, plunged 14.03% to $738.30.
Nvidia, at the center of the enthusiasm accompanying the development of artificial intelligence, lost almost 4%.
The American coffee giant Starbucks drank, falling 15.88% to $74.44 after publishing results on Tuesday for the second quarter of its staggered financial year, well below market forecasts.
Between January and March, the chain earned a turnover of 8.56 billion dollars (-1.8% over one year) and a net profit of 772.4 million, down 15% over one year.
Investors have welcomed pharmaceutical giant Johnson & Johnson’s decision to end civil lawsuits in a talc case accused of causing cancer, paying about $6.5 billion over twenty-five years. The stock rose 4.56%.
The Pfizer laboratory, whose shares had fallen significantly last month, regained strength (+6.09%) while the group revised its annual forecasts slightly upwards.
DJT stock, owned by Donald Trump’s media company TMTG, showed further volatility, falling 9.61% to $45.13.
© 2024 AFP
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