Tuesday, September 28, 2021
Interest and other worries
The mood is bad on Wall Street
Concerns about rising interest rates and an impending US default broke the US stock exchanges on Tuesday, some of the most significant losses since May. The technology stocks on the Nasdaq are particularly under selling pressure. Long-scorned bonds are becoming interesting again for investors.
Investors are selling US stocks out of fear of a dwindling flood of money from the Fed and rising interest rates. Disappointing economic data also hit their mood on Tuesday. At the moment everything seems to be falling over the stock exchanges at once: possible tax hikes, rising inflation, the spread of the delta variant, said Ken Mahoney, head of wealth manager Mahoney. The US Standard Values Index Dow Jones closed 1.6 percent lower to 34,299 points. The technology-heavy one Nasdaq gave in 2.8 percent to 14,546 points. The broad one S&P 500 lost two percent to 4352 points.
According to experts, rising inflation and higher interest rates will devalue future profits of high-growth technology companies. Investors also parted with US Treasuries, thereby setting the yield of the trend-setting ten-year US bonds rose to a three and a half month high of plus 1.567 percent. This would make bonds a competition for stocks again, added stock market expert Mahoney. “That was not an issue for investors in the past few years.”
Fed is likely to tighten the reins soon
Federal Reserve Chairman Jerome Powell’s latest statements signaled growing nervousness about inflation, said economist Sarah Hewin of Bank Standard Chartered. Investors feared that the temporary price-driving factors would develop into permanent ones. Stockbrokers assume that the Fed will raise interest rates as early as 2022. This lifted the Dollar index, which reflects the exchange rate against major currencies, temporarily to an eleven-month high of 93.806 points.
At the same time, the clouded over US consumer confidence decline corporate earnings outlook has dropped to its lowest level since February. Private consumption is considered to be the mainstay of the world’s largest economy. Another stress factor for the mood are that Real estate group China Evergrande is in trouble and the energy crisis in the People’s Republic, said Gianclaudio Torlizzi, partner in the consulting firm T-Commodity. Due to a shortage of coal and to reduce emissions, the Beijing government is forcing companies to cut production. According to experts, this fueled fears of a weakening of the global upswing.
The dispute over the Raising the US debt ceiling was also a headache for some stockbrokers. If Congress does not decide on such a step by Thursday, there is a threat of a government shutdown from Friday, the closure of numerous authorities. So far, the bickering has been viewed as a political skirmish, said Jason Pride, chief investor at asset manager Glenmede. But if this deadline expires and no agreement is found by the third week of October, the topic will determine the course. According to experts, the US could then become insolvent.
Ford’s electric car plans are electrifying investors
Bucking the trend, shares rose from ford by 1.1 percent. The car manufacturer is investing around 11.4 billion dollars with its South Korean partner SK Innovation in the construction of an electric version of its bestseller, the F-150 pickup, as well as in battery production facilities. These expenses are apparently part of the $ 30 billion investment package for e-cars, commented analyst David Whiston from the research company Morningstar. Therefore, his assessment of the company remains unchanged.
The titles of Digital brands jumped more than 19 percent. The company, which specializes in luxury fashion made of denim, is forecasting a sales increase of 350 percent to 37.5 to 42.5 million dollars for 2022.