Wall Street is looking for direction, scalded by poor Chinese and American indicators

The floor of the New York Stock Exchange (AFP/Archives/ANGELA WEISS)

The New York Stock Exchange was looking for direction on Monday, crumpled by poor Chinese and American indicators, which point to a pronounced economic slowdown.

Around 2:00 p.m. GMT, the Dow Jones yielded 0.01%, the Nasdaq index, with a strong technological composition, gained 0.08%, and the broader S&P 500 index lost 0.09%.

Wall Street recently welcomed the fall of the manufacturing activity index of the New York region, which emerged in sharp contraction in August, to -31.3, while economists forecast an expansion of 5 points.

“It was quite spectacular”, commented Karl Haeling, of LBBW, “but the drop” in the indices “was already registered” before the publication of this indicator, he underlined.

“So it seems that the newcomers from China have captured most of the market’s attention,” he said.

The world’s second largest economy published a series of poor figures on Monday, indicating weaker growth in industrial production, retail sales and investment.

“This slowdown confirms the hypothesis that the good figures of May and June corresponded to the rebound of the reopening (after the confinements linked to Covid-19) and that now (…) the Chinese factories will, again, turn to the slowed down,” said Craig Botham of Pantheon Macroeconomics in a note.

These new signs of fatigue in the global economy showered investors, some of whom retreated to the bond market. The yield on 10-year US government bonds eased to 2.77% from 2.83% on Friday.

For Patrick O’Hare, of, the softness of the New York place is also due “to the idea that the market was too quick to do its job by integrating a more accommodating repositioning of the Fed (American central bank)” to take into account a decline in inflation and deteriorating economic conditions.

The probability of a half-point hike in the Fed’s key rate in September, as assessed by investors, is the highest in weeks, at 63%, according to the CME exchange model, while that the thesis of an increase of 0.75 percentage point, the third in a row, has long been favoured.

After a prolonged rebound from the lows of June, Wall Street wonders about the continuation of its trajectory.

“There is a debate between those who bet on a continuation of the rise (the “Bulls”) and those who believe in a fall (the “Bears”)”, explains Karl Haeling. The Nasdaq recently returned to “Bull Market”, which means that it has gained more than 20% since its low on June 16 (+23%), and the S&P 500 is approaching it (+17%).

“I don’t think the market can continue to rise without stopping,” said the analyst, for whom certain technical thresholds could again be tested downwards, “but perhaps not until the lows of June”.

As earnings season draws to a close, the week will be one of retail, with Walmart on Tuesday and Target and Lowe’s on Wednesday.

On a similar theme, retail sales for July will give an even more comprehensive look at consumer behavior on Wednesday as an economic slowdown looms.

On the sidelines, battered last week, the Moderna laboratory recovered on Monday (+4.19% to 178.36 dollars), helped by the marketing authorization for its new anti-Covid vaccine targeting the Omicron variant by the UK medicines regulator.

Weighed down by the prospect of lower demand linked to the economic situation and the plunge in black gold prices on Monday, oil stocks were penalized, whether ExxonMobil (-4.28%), Chevron (-3.48 %) or ConocoPhillips (-3.96%).

The manufacturer of hydrogen batteries Plug Power (+0.41% to 29.66 dollars) benefited from the adoption in Congress of the climate and health plan, which provides for investments in renewable energies and bonuses for households who will equip themselves.

© 2022 AFP

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