Fear of a sharp rise in interest rates
Wall Street stabilizes after price slide
03/08/2023 11:32 p.m
Fear of interest rates rising more quickly is causing a sharp drop in prices on Wall Street. In the meantime, the leading indices have recovered somewhat. But investor fears remain.
The US stock exchanges have largely stabilized after the price slide on the previous day. Most of the most important indices increased, only the Dow Jones Industrial fell a little further. The focus remains on the question of how significantly and how often key interest rates will be raised in the fight against high inflation.
The dow lost 0.18 percent to 32,798.40 points. The market breadth S&P 500 rose 0.14 percent to 3992.01 points. For the technology selection index Nasdaq 100 it went up 0.52 percent to 12,215.33 points.
Fear of interest rates rising more quickly triggered a price slide on the US stock exchanges on Tuesday. Federal Reserve Chairman Jerome Powell told the US Senate Banking Committee that the final rate level is likely to be higher than previously thought and that the Fed could pick up the pace of rate hikes.
However, according to Powell, the Fed has not yet committed to its future pace of rate hikes. “We haven’t made a decision about the March session yet,” he told the House Financial Services Committee during its second day of hearings before Congress.
The economic highlight of the week is then due on Friday with the official labor market report. Should employment and salaries rise more sharply in February than previously forecast, this could reignite interest rate fears and weigh on the stock markets. Higher interest rates make equities less attractive than bonds.
Tesla lost three percent
However, current job data from Wednesday indicate that the job market will remain robust. Employment in the private sector was better than expected. In addition, the number of vacancies at the beginning of the year did not fall as much as expected and thus remained at a historically high level. This points to a persistent imbalance between labor demand and supply, which in turn supports higher interest rates from the Fed. “Conditions on the labor market remained solid,” wrote the central bank in its economic report published in late trading.
At the end of the Dow, shares fell by Merck & Co by 2.7 percent. The pharmaceutical company had Opko Health signed a worldwide license and collaboration agreement to develop a vaccine against the Epstein-Barr virus, which causes glandular fever and is linked to multiple sclerosis and some types of cancer. Merck will make an upfront payment of US$50 million to Opko. The Opko papers rose by 6.6 percent.
The shares of Tesla lost 3 percent among the weakest stocks on the Nasdaq 100. The electric car maker was targeted by the NHTSA after complaints about missing steering wheel mounts. The authority announced on its website that it had launched a preliminary investigation into two reports of steering wheels falling off while driving. The papers from crowd strike rose a good three percent in the Nasdaq 100. The cyber security specialist performed better than expected in the fourth quarter and is also more optimistic about the first quarter than analysts had forecast.
On the foreign exchange market Euro according to robust industrial data from Germany. In late New York trade, the shared currency was trading at $1.0546. The European Central Bank had set the reference rate at 1.0545 (Tuesday: 1.0665) dollars. The dollar had thus cost 0.9483 (0.9377) euros. The futures contract for ten-year bonds (T-Note future) fell by 0.06 percent to 110.89 points. The yield on ten-year government bonds was 3.98 percent.