Little movement, a lot of stagnation
Wall Street in slumber mode
April 8, 2024, 10:54 p.m
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US investors still doubt that the Fed will cut the key interest rate any time soon. You remain cautious and do not make hasty decisions. There is correspondingly little movement in the major indices. Apart from that, however, a lot is happening. Tesla in particular stands out.
After the recent strong US labor market report, investors on Wall Street are worried about rapid interest rate cuts. The Dow Jones index of standard stocks stagnated at 38,892 points. The technology-heavy Nasdaq closed little changed at 16,253 points. The broad S&P 500 also ended trading only slightly changed at 5202 points. Investors were betting that the US Federal Reserve could postpone interest rate cuts expected this year. This drove up US Treasury yields and kept stocks’ gains in check.
On this side of the Atlantic, however, the surprisingly strong increase in production in Germany at the start of the week provided a tailwind for Europe’s stock exchanges. The DAX advanced by 0.8 percent to 18,314 points. After the strongest increase in production in more than a year, investors hoped that Europe’s largest economy could possibly avoid the winter recession that had long been believed to be certain. Industry, construction and energy suppliers in the Federal Republic together produced 2.1 percent more in February than in the previous month, exceeding economists’ expectations.
Investors were now eagerly awaiting the US inflation data due in the middle of the week in order to draw conclusions about the timing of the US Federal Reserve’s first interest rate cut. The latest economic data from the United States, while not outstanding, was still strong, said Michael Matousek, chief trader at US Global Investors. “So why would anyone really want to lower interest rates?”
Interest rate cuts more likely in July
“I expect it will take a positive surprise in inflation data to further push market prices toward two rate cuts in 2024,” commented Blerina Uruci, chief U.S. economist at T. Rowe Price. “If this is the case, the Fed will also become more cautious and signal that the series of moderate interest rate cuts planned for this year will begin in July rather than June.” Ahead of the US inflation figures for March, the dollar weakened slightly in weak trading.
Meanwhile, US yields rose to their highest level since November last year. Ten-year US Treasuries peaked at 4.464 percent. In terms of individual stocks, Tesla shares rose by around five percent. The US car manufacturer wants to bring so-called “robotaxis” onto the market instead of cheap small electric vehicles and is thus boosting its shares. According to recent information from insiders, Tesla has abandoned its plans to build a low-cost electric car for the mass market.
Gold price climbs to record high
The US group faces fierce competition worldwide from rivals from China, who are flooding the market with electric cars with purchase prices starting at $10,000. Investors also stocked up on JPMorgan Chase stocks. It was a relief that the board of directors of the largest US bank had declared that it would prioritize an orderly change at the top of the group.
JPMorgan boss Jamie Dimon has been at the helm of the bank for 18 years. Since Dimon’s emergency operation in March 2020, the bank has intensified the dialogue about the successor, said Chris Marinac of financial advisor Janney Montgomery Scott. “However, I don’t think this means Dimon is leaving tomorrow, he could be here for a few more years.” Meanwhile, the price of gold climbed to a record high for the seventh time in a row, fueled by central bank purchases and geopolitical tensions. The yellow metal rose in price by up to 1.0 percent to $2,353.79 per troy ounce.