Nasdaq slips 2.2 percent
Rejection of quick interest rate cuts shocks US markets
January 31, 2024, 11:02 p.m
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The US Federal Reserve rebuffs the optimists on Wall Street: interest rates will remain unchanged and there will probably be no reduction in March either. The US stock exchanges then went down significantly. The Nasdaq is hit hardest.
Profit-taking dominated the picture on the US stock exchanges on Wednesday. Shortly after the starting bell he made it Dow Jones Index Although it was still a new record high, it was unable to defend it and closed 0.8 percent weaker at 38,150 points. The S&P 500 and above all that Nasdaq-Indices were weighed down right from the start by bitter disappointments from some heavyweights in the technology sector. They fell by 1.6 and 2.2 percent.
The US Federal Reserve’s interest rate decision was not the relief that optimists on Wall Street had hoped for. As expected, the Federal Reserve confirmed the current interest rate level. Following the meeting, Fed Chairman Jerome Powell said a rate cut at the next date in March was unlikely. First of all, “clear signals” are needed that inflation is moving sustainably towards the target of two percent. Many financial market participants had hoped for a turnaround in interest rates as early as March.
At least the Fed removed the option of further interest rate increases from its accompanying commentary. “The Fed is now finally saying goodbye to its tendency to further interest rate hikes,” commented Elmar Völkel, senior fixed income analyst at LBBW Research. “The risks of insufficient tightening of monetary policy and sticking with high interest rates for too long are now balanced. That means: the US central bankers are keeping the path equally open in both interest rate directions. However, given the falling inflation, everything indicates that the next one step will be a reduction.”
From today’s perspective, an imminent interest rate cut is unlikely unless the US macro environment changes abruptly in the coming weeks. Völkel assumes that the US Federal Reserve will loosen its monetary policy for the first time in June. Fed fund futures priced a rate cut in March at slightly less than 50 percent.
Meanwhile, data from the US labor market played into the hands of the monetary policy doves. Because the ADP data was weaker than forecast. They are considered an indicator for the official labor market report on Friday. The Purchasing Managers’ Index for the Chicago region was also lower than expected in January.
Reporting season makes prices
alphabet fell by 7.5 percent. Advertising sales at Google’s parent company were disappointing. They rose less than overall sales. For AMD According to the figures, it went down 2.6 percent because the chip manufacturer had forecast sales for the first quarter that would be below expectations. Among the competitors there were Nvidia by 2 percent while Intel increased by 0.4 percent. However, Intel shares had already suffered considerably after a disappointing outlook last week.
The course of Microsoft fell by 2.7 percent, the software giant had exceeded market expectations. The figures for the technology flagships are also likely to initially trigger sales because other trendsetters, Apple, Amazon and Meta, will follow on Thursday, which may also disappoint. In addition, market experts pointed out the already very high valuations of technology companies.
Meanwhile, the food manufacturer also had business figures Mondelez and the coffeehouse chain Starbucks presents. Mondelez traded 1.5 percent lower, Starbucks fell 1.1 percent. Mondelez expects slower growth in 2024, and Starbucks also reported little Paypal lost 3.7 percent, the payment service provider wants to cut nine percent of jobs. Walmart fell 0.2 percent after the retail giant announced a 3-for-1 stock split to make its shares easier to trade. Boeing rose 5.3 percent, easing the pressure on the Dow; the aircraft manufacturer performed better than expected in the fourth quarter. Paramount Global rose by 6.7 percent – the media mogul Byron Allen had submitted a takeover offer worth billions.
oil was cheaper after US crude oil inventories rose unexpectedly. In addition, reports were circulating that Russia would have to make increasingly significant price concessions because of Western sanctions in the wake of the attack on Ukraine.