Wednesday, January 05, 2022
Shock wave on Wall Street
Fed minutes send stocks plummeting
On Wall Street, a paper from the US Federal Reserve created a subdued mood. In this, the monetary authorities indicate faster rate hikes. The share prices react negatively to this announcement. While tech stocks are making losses, the shares of the German Mainz Biomed are experiencing a price explosion.
An unexpectedly hawkish minutes of the US Federal Reserve’s meeting in December caused a shock wave on the US stock exchanges. The Nasdaq indices, which were already weak on the previous days and contain the shares of many companies that are considered to be particularly high-growth, were particularly badly hit by the wheels. They are considered to be particularly sensitive to rising interest rates.
During the Dow Jones-Index with a minus of 1.1 percent and 36,407 points from the day went and the S&P 500-Index fell 1.9 percent, they sagged Nasdaq-Indices down by up to 3.3 percent. All indices thus practically closed at the daily lows. According to initial information, there were 627 (Tuesday: 1,803) course winners and 2,754 (1,581) losers on the Nyse. 111 (86) titles closed unchanged.
Yields on the bond market increased further, by 5 basis points to 1.70 percent in the ten-year segment and by as much as 8 points in the two-year segment. That is the highest level since April 2021. Even before the minutes were published, a rate hike of 25 basis points in March was priced in with a 58 percent probability on the interest rate futures market. the dollar reduced its previously seen losses with the updated interest rate outlook. Most recently, the dollar index was only just in the red.
Central bankers signal faster rate hike
The minutes reveal a growing discomfort among US central bankers about high inflation. It literally states: “Participants generally stated that, given their individual outlook for the economy, labor market and inflation, it may be justified to raise the key rate sooner or faster than they previously expected.” In addition, it might be appropriate for some participants to reduce the central bank balance sheet, which was inflated by the massive bond purchases, relatively soon after the first interest rate hike.
It was only before trading began that there was further evidence of the robust US economy. The labor market data of the service provider ADP showed a much stronger job growth in the private US economy than expected for December. The data are used as an indication for the official labor market report on Friday.
“I think investors are realizing that now is not the time to put your head too far out the window,” commented portfolio manager Robert Pavlik of Dakota Wealth Management. He pointed out that there had been a revaluation of so-called value stocks the previous day and that sales in the tech sector continued on Wednesday.
In the stock market, stocks from less cyclical sectors such as telecommunications (+1.4 percent) and food (+0.3 percent) performed best. In the end, the cyclical and recently very strong auto stocks (-4.9 percent) and semiconductor stocks (-3.5 percent). Bank stocks, which are seen as beneficiaries of higher interest rates and were recently still in demand, fell by an average of 1.3 percent.
Smart global under pressure despite good numbers
So-called meme stocks fell sharply among the individual stocks. AMC Entertainment gave around 10.7 and Game stop by 13.1 percent. Meme stocks are papers that have repeatedly shown drastic price increases, mostly triggered by private actors who join forces on social media.
At the technology company Smart Global Holdings (-15.4 percent to $ 61.52) good news was either not good enough or investors took profits. In the previous year the price had risen by over 80 percent. In addition to strong and better than expected business figures, the company announced a 1: 2 share split. Barclays then raised its target price to $ 82 from $ 60.
The shares of the German company listed on the Nasdaq experienced a price explosion Mainz Biomed. The company has acquired exclusive rights to novel mRNA biomarkers for colorectal cancer screening tests. The share shot up by around 46 percent, but at the daily high the plus was already over 70 percent.
That reacted like the share prices oil negative on the Fed protocol. Prices came back from the daily highs and closed at the previous day’s level. In the meantime, market participants identified unrest in the oil-producing country of Kazakhstan, where the president dismissed the government after violent popular protests over high gas prices, as a driver. Kazakhstan produces around 1.6 million barrels every day. Oil Price Information Service analyst Tom Kloza speaks of a “black swan” in view of the unrest, a completely unexpected event.