Hardly any hope for a March interest rate turnaround
Wall Street is taking a breather
February 5, 2024, 10:55 p.m
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At the start of the week, US indices are taking a breather on their run to ever new records. After Friday’s strong US jobs data, investors are cashing in on their bets on rapidly falling interest rates in the US.
The continued strong rise in US market interest rates has curbed the buying mood for stocks. The trigger for the latest rise in interest rates was the unexpectedly strong US labor market report for January. In addition, the Purchasing Managers’ Index (ISM) for the US services industry in January was released on the reporting day. It significantly exceeded expectations and signals growth. Both of these tend to speak against interest rate cuts in the near future.
In addition, US Federal Reserve Chairman Jerome Powell once again put a damper on hopes of interest rate cuts at the weekend. He said in an interview that the Fed is in no hurry to cut interest rates given the economy’s strength. The market is therefore preparing for interest rates to remain elevated for a longer period of time. The probability of a first interest rate cut in March has now fallen massively to almost 15 percent, compared to 64 percent a month ago.
The Dow Jones Index closed 0.7 percent lower at 38,380 points. The S&P 500 and the Nasdaq indices fell less significantly by 0.3 and 0.2 percent respectively. Profit-taking may also have played a role in the losses after the indices reached record levels on Friday. According to initial counts, there were 566 (Friday: 975) price winners and 2,301 (1889) losers on the Nyse. 39 (47) titles closed unchanged.
Dollar at highest level since November
In the wake of bond yields, things also went down for the dollar further up. The dollar index climbed 0.5 percent. The euro fell to around $1.0740. This is the lowest level since November.
The Oil prices rose by around 1 percent, supported by the tense situation in the Middle East. US and British forces say they have shelled dozens of targets belonging to the Iran-backed Houthi militia in Yemen. They were responding to the Houthis’ ongoing attacks on shipping in the Red Sea. “In recent years, such political unrest has driven crude oil prices higher. However, with record U.S. oil production and no real supply declines from the Middle East, most of the geopolitical price premiums have already been priced in,” said Dennis Kissler of BOK Financial. The Gold price lost $14 to 2,026 a troy ounce. The firm dollar and rising bond yields weighed on the precious metal.
McDonald’s bottom of the Dow
The accounting season was eventful on the stock market. MC Donalds fell by 3.7 percent and thus had a significant impact on the Dow. The quick-service restaurant chain increased profits more than expected, but the war in the Middle East slowed growth, which is why like-for-like sales rose less than expected. New defects in the problem aircraft 737 Max pressed the issue Boeing course by 1.3 percent. Incorrectly drilled holes were discovered on some aircraft fuselages.
Dow winners of the day Caterpillar with an increase of 2.0 percent. The market thus rewarded a surprisingly significant increase in profits in the mechanical engineering company’s fourth quarter. The meat producer and processor performed better than expected Tyson Foods (+2.0%) in its first fiscal quarter. They responded with an increase of 9.7 percent Catalent on the takeover by Novo Holdings, the parent company of the Danish pharmaceutical company Novo Nordisk.
Nvidia (+4.8% to $693.32) reached a record high. Goldman Sachs raised the price target for the stock to $800 from $625 and added it to its Conviction Buy List.