Further jumps in interest rates in the summer
Fed minutes give U.S. stocks a boost
May 25, 2022, 10:21 p.m
Investors remain cautious on US equities ahead of the much-anticipated release of the latest Fed minutes. However, the details from the last meetings of the central bank ensure a strong upswing on Wall Street.
In view of the high inflation in the USA, the Fed is showing broad support for further large rate hikes in the summer. As can be seen from the minutes of the monetary policy meeting on May 4th, which were published on Wednesday, all monetary watchdogs backed the half a percentage point increase that had been decided upon. On Wall Street, the incidences turned positive again after the good news. The leading index Dow Jones Industrial ended up 0.60 percent higher at 32,120.28 points. For the broad market S&P 500 it went up 0.95 percent to 3978.73 points. The tech-heavy one Nasdaq 100 rose by 1.48 percent to 11,943.93 points.
According to the Fed transcripts, most participants also felt that further moves of that size at each of the June and July meetings would be “probably appropriate”. After the largest jump in interest rates in 22 years, the monetary policy level is now in a range of 0.75 to 1.00 percent. At the meeting, monetary authorities agreed that the economy was very strong and the labor market was extremely tight. In addition, inflation was assessed as high, with the risks of an acceleration in inflation even “pointing to the upside”. Global supply chain problems, the Ukraine war and the corona lockdowns in China were seen as possible drivers.
Of the dollarindex, which tracks the rate of major currencies, rose 0.6 percent to 102.31 points. It hit a 19-1/2-year high about two weeks ago and is down about 2.5 percent since then.
Meanwhile, supply concerns pushed oil prices higher again. The US variety STI increased in price by up to 0.3 percent to $110.07 per barrel (159 liters). “Shortly before the start of the summer driving season, US gasoline inventories are at their seasonally lowest level since 2014,” said Commerzbank analyst Carsten Fritsch. Therefore, the US government is apparently considering an export ban for crude oil products, which should cause a further price hike in the rest of the world. In the case of industrial metals, on the other hand, the pessimists were in the majority. “Negative has returned to markets as economic data fuel growth concerns,” analysts at ANZ Bank wrote. The one needed for power cords and water pipes copper then gave way one percent to $9,460 a ton.
In the shares of Wendy’s Investors took heart and helped the fast-food chain to increase in price by more than 10 percent, the largest in a year. Billionaire and major shareholder Nelson Peltz says he is considering various options, including an outright takeover, a merger and other transactions. However, Wendy’s shares are expensive compared to the rest of the industry, said analyst Andrew Charles from asset manager Cowen. In addition, the company finds itself in tough competition with market leader McDonald’s.
The titles of were also in demand north current, which rose by more than 13 percent thanks to higher full-year targets. The brand fashion retailer is aiming for a sales increase of 6 to 8 instead of 5 to 7 percent. Earnings per share will be $3.38 to $3.68 instead of $3.15 to $3.50. In the past quarter, revenues grew surprisingly strong by almost 19 percent to $ 3.57 billion. At $0.01 per share, the loss was significantly lower than feared. High-income fashionistas are increasingly flocking to stores to stock up on clothes for events or travel, commented analyst Stephanie Wissink of investment bank Jefferies. She expects continued strong results at Nordstrom for the coming quarters.