Dow buckles
Interest rate optimism on Wall Street is dwindling
January 16, 2024, 10:37 p.m
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Investors on Wall Street expected up to six interest rate cuts this year. These hopes are increasingly proving to be fantasies. Experts think two or three are realistic. The Dow is starting the short stock market week with a setback.
Growing doubts about imminent interest rate cuts and, as a result, significantly rising yields have caused losses on Wall Street after the long holiday weekend. The ten-year return US bonds climbed above the 4.0 percent mark. The Dow Jones Index fell by 0.6 percent to 37,361 points. The S&P 500 recorded a minus of 0.4 percent and the Nasdaq Composite fell by 0.2 percent. 572 (Friday: 1,543) price winners were seen, compared to 2,296 (1,262) losers. 45 (106) titles closed unchanged.
The US Federal Reserve is currently trying to recapture the market’s far-anticipated interest rate cut expectations. Fed Governor Christopher Waller warned against over-tightening monetary policy, but at the same time also against hasty interest rate cuts. The continued decline in inflation would allow the Federal Reserve to cut interest rates this year, Waller said. However, this process should be carefully calibrated and not rushed.
“That will not happen”
The Fed is unlikely to make six rate cuts this year, as the market expects in 2024, unless the U.S. experiences a severe recession, said Ken Rogoff, an economics professor at Harvard University and former chief economist at the International Monetary Fund. “That’s a pipe dream, if we have a soft landing, that’s not going to happen – we’ll get two or three,” Rogoff added.
On Monday, ECB Governing Council member Robert Holzmann said stubborn inflation may prevent the ECB from cutting interest rates this year. As a result, the yields on federal bonds increased. US yields followed suit on Tuesday. The surprisingly weak Empire State Manufacturing Index only briefly weighed on returns. The index fell to minus 43.7 in January, which was significantly weaker than expected. In addition, the worsening situation in the Red Sea fueled fears of delivery bottlenecks and subsequent rising inflation.
Morgan Stanley and Goldman Sachs with numbers in focus
With Goldman Sachs and Morgan Stanley two other major banks reported on their business developments in the fourth quarter. Morgan Stanley clearly exceeded expectations with its earnings, but missed analyst consensus with its profit; shares fell 4.2 percent. Goldman Sachs took in and earned more than expected. The price rose by 0.7 percent. Last Friday, Citigroup, Bank of America, JP Morgan and Wells Fargo presented figures that included some light and a lot of shadow.
The Boeing stock fell by 7.9 percent and was the biggest loser in the Dow. After the emergency landing of an Alaska Air Boeing plane, the long-awaited resumption of deliveries of 737 Max aircraft to China has been delayed again. China Southern Airlines was actually scheduled to receive the long-ordered but not yet delivered Boeing aircraft in January, people familiar with the matter said. After the incident, the airline wanted to carry out additional security checks.
In the technology sector there were Apple by 1.2 percent. The US Supreme Court has shot down Apple’s attempt to appeal a decision in an antitrust case over its App Store. Apple and “Fortnite” developer Epic Games independently appealed to the US Supreme Court last year to intervene in their legal dispute. The court has now rejected both companies’ applications.