The facade of the New York Stock Exchange (GETTY IMAGES NORTH AMERICA/SPENCER PLATT)
The New York Stock Exchange opened sharply lower on Tuesday, fearing a higher-than-expected US inflation gauge, indicating that the battle against rising prices is far from over and illustrating the more monetary tightening.
By 3:55 pm GMT, the Dow Jones was down 1.92%, the Nasdaq index was down 3.12% and the broader S&P 500 index had lost 2.32%.
The CPI price index increased slightly by 0.1% in August compared to July, while economists had predicted a decrease of 0.1%.
Over a year, inflation in the United States reached 8.3%, from July at 8.5%, but more than 8.0% market forecast.
“It’s a little disappointing,” commented Art Hogan of B. Riley Wealth Management, who also noted the negative surprise in the index excluding energy and food. The latter rose again to 0.6% in the month, against 0.3% expected and 0.3% in July.
Another dark area, food prices, gained another 0.8% in one month and remained at 11.4% in one year.
“It is clear that inflation will be stubborn, which will encourage the governor (US central bank) to remain enthusiastic”, concluded Art Hogan.
“Inflation figures remain unacceptable for those responsible” for monetary policy, added Rubeela Farooqi, chief economist at High Frequency Economics, in a note. “These data signal another rate hike of 0.75 basis points next week” by the Fed.
Traders quickly recalibrated their forecasts for the Fed’s path and now see the US central bank raising rates by at least 1.75 percentage points in total over the last three meetings in year, against 1.50 points so far.
They now even give a non-negligible probability (18%) to the scenario of a one-point increase at the next meeting of the Fed’s Monetary Policy Committee, on September 21 and 22, a hypothesis that no one thought until today. .
“It is becoming increasingly clear to traders that the tightening already done by the Fed is not enough to cool the economy and lower inflation,” replied Charlie Ripley of Allianz Investment Management.
The prospect of a longer-than-expected battle against inflation has also fueled the bond market. The yield on 10-year US government bonds rose to 3.43%, from 3.35% the previous day.
The US 2-year rate, which is more sensitive to medium-term monetary policy expectations, rose to 3.74%, against 3.57% the previous day, a peak in almost 15 years (November 2007).
This burst of interest rates has put pressure on technology stocks, which rely on credit conditions to fund their growth.
The increase is heavy for Meta (-6.32%), Amazon (-4.92%), Nvidia (-5.40%) or AMD (-5.59%), but all of them are heavyweights in the Nasdaq that are sinking together.
All members of the Dow Jones are also in the red.
“We had a nice rebound prior to this publication and had a substantial return,” explained Art Hogan.
While the advances in the last sessions were largely fueled by the prospect of a sharp reduction in rates and a possible easing by the Fed from the end of 2023, “traders will be surprised to see how difficult the bringing inflation under control,” said Chris Zaccarelli of the Independent Advisor Alliance.
Among the few that will come out of it, the specialist in liquefied natural gas (LNG) Cheniere (+ 4.03% to 167.21 dollars), the largest exporter of American LNG, taking full advantage of the market for gas and raising the its guide for the whole year.
Another glimmer in the dark, the Oracle software group (+ 0.66% to 77.59 dollars), which is better than expected in its quarterly turnover, supported by its remote computing activity (cloud).
Twitter fell again (-1.21% to 40.91 dollars), on the eve of an important day for the social network, marked by the hearing of whistleblower Peiter Zatko in Congress and in general extraordinary assembly that must validate the acquisition of Elon Musk, who has since been officially given.
The specialist in connected exercise bikes and treadmills Peloton unscrewed (-9.52% to 10.00 dollars) after announcing the departure of its co-founder John Foley, who left his post as executive chairman. He left the position of general manager in February.