Long weekend for investors
Inflation data is once again slowing down Wall Street
February 16, 2024, 10:44 p.m
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If the economy is booming and producer prices rise, then this will run counter to hopes that key interest rates will fall again. And it curbs the buying mood of investors on Wall Street. At the end of the week, a potential record high is becoming more distant again.
Disappointment over unexpectedly high US producer prices dampened the buying mood on Wall Street on Friday. At first it looked like prices would continue to rise and potentially reach new record highs, before inflation data threw a spanner in the works. At 0.3 percent month-on-month, producer prices rose noticeably more strongly than expected at 0.1 percent, and the core rate even increased by 0.5 percent.
This created a headwind for stocks from the interest rate side, as was recently seen with negatively surprising consumer prices. The fact that there is a long weekend ahead may also have contributed to the reluctance. On Monday, business in the USA will be closed due to the Washington’s Birthday holiday.
At the Bond market yields shot up. In the ten-year range, they temporarily reached their highest level since the end of November 2023. Building permits provided a small counterweight to the interest rate prospects. They fell much more significantly in January than expected. And the University of Michigan’s consumer sentiment index in February came in at 79.6, slightly missing the economists’ consensus estimate of 80.0.
The US economy is doing well
The Dow Jones Index closed 0.4 percent lower at 38,628 points. The S&P 500 lost 0.5 percent. The technology-heavy one Nasdaq Composite gave up 0.8 percent. The 942 (Thursday: 2359) price winners on the Nyse were compared to 1877 (497) losers, while 77 (51) titles went out of trading unchanged.
The recent upward trend on the US stock market was driven by economic confidence in view of consistently robust US economic data. The other side of the coin is that robust economic figures run counter to hopes that interest rates in the USA will soon fall. Producer prices now took the same line. On the interest rate futures market, the probability of a first interest rate cut in June promptly fell from 80 percent the day before to just under 70.
According to observers, the fact that the price losses on Friday were ultimately mostly limited was because the data did not change the fact that inflation overall is on the decline. A postponement of interest rate cuts alone is not perceived as a catastrophe. Doubts about a “bullish” event – in this case interest rate cuts – must be distinguished from fears about “bearish” events such as a rebound in inflation or a slump in the economy, said Tim Hayes, chief global investment strategist at Ned Davis Research. He gave it appropriately dollar interim profits decline again. The dollar index was little changed recently.
Semiconductor supplier gives positive outlook
On the corporate side delivered Applied Materials a positive impulse for the technology segment. The supplier to the semiconductor industry performed better than expected in its first quarter and gave a positive outlook. The share rose by 6.3 percent.
Nike lost 2.4 percent. The sporting goods manufacturer announced that it would reduce its workforce by around 2 percent or 1,600 employees. Doordash fell by 8.1 percent. The food delivery service exceeded expectations in its fourth quarter; However, in trading it was said that given the shares had previously performed very well, some market participants would have been betting on even better figures.
Draftkings Although it significantly reduced its loss in the quarter under review, analysts had even expected a profit. The sports betting provider’s share price recovered from initial losses and rose by 0.2 percent. Roku fell by around 24 percent. The streaming service provider missed expectations due to a weaker advertising environment. Trade Desk On the other hand, they rose by 17.5 percent, driven by an unexpectedly strong outlook. The crypto exchange Coinbase (+8.8%) had closed a quarter with a profit for the first time in almost two years.