The facade of the New York Stock Exchange (AFP/Angela Weiss)
The New York Stock Exchange opened lower on Friday, at the end of a dark week for investors, upset by the results of FedEx, which are fueling fears of recession, and the rise in bond rates.
Around 2:15 p.m. GMT, the Dow Jones lost 0.64%, the Nasdaq index dropped 1.32% and the broader S&P 500 index fell 0.91%.
The three major Wall Street indexes are at their lowest since mid-July.
“It hasn’t been a good week for the market and it’s going to get even more complicated,” warned Patrick O’Hare of Briefing.com in a note.
For him, the pessimism of the operators was fueled on Friday by the courier group FedEx, which published Thursday, after the stock market and in an anticipated way, results below expectations.
Managing Director Raj Subramaniam spoke of a deterioration in the macroeconomic environment at the end of the accounting quarter, which ended at the end of August, with the slowdown affecting Asia, Europe and the United States at the same time.
In an interview with CNBC, the leader said he expected the global economy to soon go through a recession. Given the uncertainty about the economic situation, the group withdrew its annual forecasts.
The title FedEx was massacred at the start of the session (-21.69% to 160.44 dollars), while that of its great rival, UPS, also took a shine (-4.09%).
“This warning is sinking the entire market because it hits at the heart of the concerns that have driven stocks down sharply this week,” O’Hare said.
The analyst was referring to fears that sharp monetary tightening by central banks would “push the economy into recession”, raising concerns among investors that corporate earnings forecasts are currently too optimistic.
This shadow is causing traders to review equity valuations, as is the sharp rise in rates, according to Nick Reece of Merk Investments.
“Real” ie inflation-adjusted rates “continue to climb” as investors now expect the US central bank (Fed) to be more aggressive, and for longer. “This is putting valuations under pressure,” the analyst said, particularly in the tech sector.
The yield on 10-year US government bonds protected against inflation, known as TIPS, thus rose on Friday to its highest level in nearly four years.
As for the 2-year US rates, they still approached 4% on Friday, to 3.92%, the highest for nearly 15 years.
Built on a model of accelerated growth, technology companies are very sensitive to financing conditions, which have tightened significantly with the rise in Fed rates.
Several of the flagships of tech descended on Friday to their lowest level of the year, such as Alphabet (-0.78%), Nvidia (-0.83%), Intel (-0.24%) or Meta ( -2.21%), which had not experienced these valuation levels since the start of the coronavirus pandemic.
On the other hand, so-called defensive stocks, i.e. less sensitive to the economic situation, held their own, in particular PepsiCo (+0.28%), McDonald’s (+0.80%), Johnson and Johnson (+1.38%) or Merck (+1.10%).
Uber fell sharply (-4.60% to 31.60 dollars) after the group reported a “cybersecurity incident”. According to the New York Times, an 18-year-old hacker infiltrated the internal network of the vehicle reservation platform and gained access to source code and emails, among other things.
General Electric was poorly positioned (-3.98% to 66.17 dollars) after statements by its chief financial officer, Carolina Dybeck, who indicated that the conglomerate continued to suffer from supply and supply chain problems, which could limit group profits.
© 2022 AFP
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