(CercleFinance.com) – Jerome Powell woke up with a bang the US indices that had been fairly dormant since the end of February or March 12 and investors restarted the purchase programs that had been dormant for a week.
Wall Street ends at the highest point of the day and its history, with a shower of absolute records, often in the form of ‘intraday/closing’ doubles.
Starting with the Dow Jones which gained 1.05% to 39,512, then the S&P-500, with +0.9% to 5,225 points (first foray beyond 5,200 Points).
The Nasdaq Composite gained 1.25% to 16,370, the closing zenith… but not doubled since it fell 0.45% short of reaching 16,450 on March 8.
The Nasdaq-100 (+1.15%) is content with its 3rd best closing in history at 18,240, in the wake of semiconductors which have moved forward, like Broadcom +3.5 %, Paypal +3.2%, NXP +2.5%, Micron +2.4%, KLA and global Founders +2.2%, Nvidia +1.1%
The titans Apple and Amazon gained +1.5% and +1.3%, Alphabet gained +1.2% and Tesla jumped +2.5%.
What has euphorized Wall Street at this point and restored confidence close to complacency, with the VIX relaxing by -5.7% around 1:00 p.m.?
We most often read – after the session – that Jerome Powell would have ‘reassured’ the markets by validating the forecast of three interest rate cuts this year… despite inflation which is slow to approach 2%.
He considers that the recent ‘higher than expected inflation’ data has not changed the overall view of the situation, namely that ‘inflation is gradually falling’, in a less linear manner than before.
How can we rejoice at such a speech when barely 3 months previously, expectations varied between 7 and 8 rate cuts, the first of which should have taken place this very Wednesday?
In reality, the feeling that the FED is being more ‘accommodating’ than expected lies in this somewhat unexpected announcement: ‘the FED will reduce the pace of liquidation of its bond portfolio’… which amounts to a sort of quantitative easing of its monetary policy which thus becomes less restrictive.
Message received 5 out of 5 by financial stocks which collectively jumped more than 2% with Comerica and Citizens Fnl +3.8%, Capital One +3.6%, Morgan Staley +3.3%, Bank of America and Goldman Sachs +2%.
But no less than 9 of the eleven constituent sectors of the S&P-500 ended the session in the green, including five having gained at least 1%.
The perception of interest rate market specialists seems very different from that of equity managers: the ’10 year’ only relaxed by one additional point after J. Powell’s press conference, i.e. -2.4 points to 4.269 %, the ’30 years’ even deteriorated by +1 Points to 4.4540%.
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