The floor of the New York Stock Exchange (GETTY IMAGES NORTH AMERICA/AFP/SPENCER PLATT)
The New York Stock Exchange opened higher on Monday, an attempt to rebound inspired by the downward revision of the support plan for the British economy as well as by the decline in bond rates.
Around 2:10 p.m. GMT, the Dow Jones gained 1.84%, the Nasdaq index took 1.23% and the broader S&P 500 index advanced 1.72%.
On Friday, the Dow Jones, Nasdaq and S&P 500 all ended at their lowest level of the year at the close, rolled by traders convinced that the global economy is heading for a recession.
“There have been so many false signals that you have to take it with a grain of salt,” commented Gregori Volokhine, of Meeschaert Financial Services, about the beginnings of a rebound on Monday.
Besides the start of a new month and a new quarter, traditionally favorable to purchases, the market was stimulated by the reversal of the British government, which gave up the elimination of a 45% tax bracket for taxpayers whose income exceeds 150,000 pounds per year.
However, even if it was an emblematic measure of Prime Minister Liz Truss’ support plan, “the tax cuts will continue for most categories, so that does not change anything”, noted Gregori Volokhin.
For the manager, investors were also satisfied with the decline in bond rates, upside down for several weeks.
The yield on 10-year US government bonds eased to 3.63% from 3.82% on Friday.
The VIX index, which measures market volatility, fell slightly, a sign of less nervousness.
Wall Street was also paying attention to the Credit Suisse file, whose financial situation worries operators. According to the Financial Times, the bank spent the weekend trying to reassure customers and investors.
In an internal memo, management assured that the bank had a “solid capital and liquidity base”.
“It is well known that similar comments were heard from most investment banks during the financial crisis,” Patrick O’Hare of Briefing.com commented in a note.
Even if the American indices or even the American banking stocks did not seem affected by this development, “it must move Wall Street enormously. But they do not share their emotions because it is not in the interest of the banks to put even more worry in the system”, according to Gregori Volokhine.
“This question is fueling speculation that the Fed (US central bank) will ease, lest its very aggressive tone in terms of monetary tightening contribute to instability in the financial markets”, according to Patrick O’Hare.
Morgan Stanley analyst Michael Wilson said a “pivot” by the Fed to a more dovish stance was becoming more likely as the global financial system had just entered a “danger zone”.
He nevertheless warned that, in his view, this shift would not prevent a contraction in corporate profits, caught in the slowing economy. The earnings season will start in mid-October.
On the side, the meeting was animated by a hunt for bargains, after the slide of the last few weeks. Nike (+1.34%), Alphabet (+1.88%) or Intel (+3.55%) were wanted. Industrial values were also in verve, like Dow (+3.55%), Caterpillar (+3.99%) or Honeywell (+2.66%).
Tesla suffered (-7.26% to $246.00) after reporting Sunday that vehicle deliveries were up but below expectations in the third quarter. The electric car manufacturer also acknowledged that it was experiencing difficulties in transporting its vehicles.
The oil sector was propelled by news reports of a possible substantial production cut by the Organization of the Petroleum Exporting Countries (OPEC) and its OPEC+ deal allies, which meet on Wednesday.
ExxonMobil (+3.61%), Chevron (+4.28%), Halliburton (+6.13%) and Marathon Oil (+8.10%) were all at the party.
© 2022 AFP
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