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Wall Street down sharply ahead of the Fed

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(New York) The New York Stock Exchange fell sharply at the opening on Wednesday as bond rates climbed to a three-year high, pending news from the Fed.

Around 10 a.m., the Dow Jones dropped 0.72% and the NASDAQ plunged 2.11%, dropping below 14,000 points, and the S&P 500 lost 1.16%.

On Tuesday, the indices had ended in the red after statements by an official of the American Central Bank on the need to hit “hard” against inflation.

The Dow Jones index fell 0.80% to 34,641.18 points. The technology-dominated NASDAQ dropped 2.26% to 14,204.17 points. The S&P 500 had lost 1.26% to 4525.12 points.

The escalation in rates on 10-year Treasury bills continued on Wednesday to reach 2.62% against 2.54% the day before, a peak since March 2019, well before the COVID-19 pandemic.

These more hawkish remarks on the rates, issued by Lael Brainard, a governor of the Fed usually rather partisan of an accommodative monetary policy, captured the attention of the markets.

Especially since the official also advocated a “rapid” reduction in the Fed’s balance sheet as of May, another monetary tightening measure aimed at curbing stubborn inflation that the Fed has been slow to take seriously.

“We can no longer say that we are not witnessing a severe monetary tightening, even if it is justified in relation to inflation”, commented Gregori Volokhine, of Meeschaert Financial Services.

The views of Lael Brainard, who is also seeking Senate confirmation for a vice-chairmanship at the Fed, “triggered a kind of tantrum on Treasuries and sparked a new feeling of nervousness”, said Patrick O’Hare of Briefing.com.

The analyst refers to the 2013 “taper tantrum” or turmoil in the bond market when investors reacted badly to news that the Fed was planning to cut financial support that began with the 2008 financial and housing crisis.

“This will focus attention on the publication of the minutes of the Fed” in the early afternoon, underlined Brad Bechtel of Jefferies.

The minutes of the last meeting of the Central Bank should give details on the position of the members of the Monetary Committee on the extent of future rate hikes and the pace of reduction of assets on the balance sheet.

Rates on 30-year mortgages, a benchmark in the US market, crossed the 5% threshold on Wednesday for the first time in more than 10 years.

Home loan applications also fell for the fourth straight week, according to the Mortgage Bankers Association on Wednesday.

Developments on the war in Ukraine also remained at the center of investors’ concerns as the United States and the European Union prepare a new round of sanctions against the Kremlin.

On the odds, low-cost airline Spirit, which is being outbid by JetBlue after an initial offer from Frontier, was down 2.30% to $26.28 after climbing more than 20% the day before. just before closing.

The title of JetBlue, which made a counter-offer of 3.6 billion dollars on Spirit, higher than that of Frontier, melted by 6.2%. That of Frontier lost 8.64%.

Twitter was losing some weight (-1.76%) after being celebrated on Wall Street in recent days when Tesla boss Elon Musk announced that he had taken a sizeable stake in the social network, making him its largest shareholder.

Seven out of eleven S&P 500 sectors were down, starting with consumer products (-2.46%) and information technology (-2.21%) through banks (-0, 67%) and real estate (-0.34%).

NASDAQ



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