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Wall Street retreats after Powell comments on rate hike



(New York) The New York Stock Exchange suddenly plunged into the red on Tuesday after the president of the American central bank indicated that the institution’s rates could go higher than expected so far.

Around 10:40 a.m. EST, the Dow Jones was down 0.47%, the NASDAQ 0.29% and the S&P 500 0.55%.

Indexes fluctuated around breakeven at the open, with investors unwilling to commit until they heard what the official might say about the central bank’s upcoming moves before a Senate committee.

However, the latter stressed that the main key rate of the Fed, which has been climbing for a year to curb inflation, could continue its rise beyond the level at which the officials of the institution saw it until now stop. , or 5.1%.

“The most recent economic data is stronger than expected, suggesting that the final level of interest rates is likely to be higher than expected,” he told senators.

The terminal rate is the level to which the Fed will raise its rates. The great game of investors today is to guess how far they will go.

In view of recent figures on inflation, which remains high, consumption, which remains solid, and unemployment, which remains very low, this figure is constantly being raised.

In the wake of Mr. Powell’s remarks, the US 2-year bond rate jumped to its highest level since 2007, at 4.97%.

The 10-year rate also tightened, briefly returning above the 4% threshold.

Jerome Powell “was very aggressive, probably more than expected by observers,” noted Peter Cardillo of Spartan Capital Securities. His remarks “suggest that we could have an increase of 50 basis points” at his next meeting, he said.

In February, the Fed raised rates by 25 basis points, marking a slowdown from previous rate hikes of 50 or 75 basis points. The Fed’s key rate, which a year ago was in the 0-0.25% range, now stands at 4.50-4.75%.

However, with a more aggressive Fed on rates, to fight against inflation, also increases the risk of recession, which would have an impact on corporate profits.

On the stock side, airlines JetBlue and Spirit took 0.24% and 0.33% respectively as, according to US media, the Department of Justice is preparing to launch a formal process to oppose their merger .

Meta, the parent company of Facebook and Instagram, rose 1.59% after a Bloomberg report citing job cuts beyond the 13% workforce reduction announced in November. Its boss, Mark Zuckerberg, had promised in early February that 2023 would be “the year of efficiency”, suggesting that further cuts could come.

Electric pickup maker Rivian, struggling to ramp up production, fell 11.47% after announcing plans to market $1.3 billion worth of bonds.

WW International, which offers Weight Watchers slimming diets, jumped 40.05% after announcing the acquisition of the company Sequence, which offers online consultations with weight management specialists.

On the Toronto Stock Exchange

The Toronto Stock Exchange lost more than 150 points late Tuesday morning, undermined by losses in the base metals and finance sectors, while the major US indices also fell.

The S&P/TSX composite index of the Toronto floor lost 174.14 points to 20,340.66 points.

In the currency market, the Canadian dollar was trading at 72.85 cents US, down from its average price of 73.45 cents US on Monday.

On the New York Commodities Exchange, crude oil prices fell US$1.66 to US$78.80 a barrel, while natural gas rose 4 cents US to US$2.61 a million. BTUs.

The price of gold plunged US$31.00 to US$1823.60 an ounce and that of copper fell 10 US cents to US$3.99 a pound.

The Canadian Press

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