market report
Status: 04/22/2022 10:32 p.m
The US markets started the weekend with significant losses. They have not recovered from the announcement of significant rate hikes by Fed Chair Powell the day before.
The prospect of drastic rate hikes by the US Federal Reserve (Fed) has hit US investor sentiment hard. All major stock indices ended trading with losses. They continued the downturn that began the day before during the session after Fed Chairman Jerome Powell announced a 50 basis point hike for the upcoming May 4th Fed rate meeting. Disappointing business figures from some companies are also weighing on the stock market.
The standard value index Dow Jones closed at 33,811 points by 2.82 percent lower. The broad S&P 500 fell 2.77 percent to 4271 points. The tech-heavy Nasdaq also fell sharply, down 2.55 percent to 12,839 points, as did the select Nasdaq 100 index, which closed 2.65 percent down at 13,356 points.
“The market is concerned that the Fed is raising inflation fears too much and could slump corporate earnings going forward,” said Peter Cardillo, chief economist at investment firm Spartan.
Losses also in the bond market
In this context, US government bonds also flew out of the depots. This drove the yield on 10-year T-Bonds to a peak of 2.974 percent, close to a recent three-and-a-half-year high. The 3.0 percent mark is getting closer and closer.
Jerome Powell is messing up the stock market
The day before, at an International Monetary Fund (IMF) event in Washington, the head of the US Federal Reserve had spoken out very clearly in favor of raising the key interest rate by 50 basis points at the forthcoming Fed meeting in early May. Powell thus fueled fears in the markets that an aggressive rate hike by the Federal Reserve (Fed) could stall the economy.
His goal is to “bring inflation down without triggering a recession.” He continued, “I don’t think you’re going to hear anyone at the Fed saying it’s going to be straightforward or easy. It’s going to be very challenging.”
Are the markets overreacting?
However, the violent reaction from investors came as a surprise. Because a large rate hike by the Fed has been expected on the markets for weeks after previously high inflation rates. It is possible that the markets are overreacting. Actually, investors should have priced in the rising interest rates long ago. “In the end, Powell was just elaborating on what fed funds futures were already indicating, but some market participants seem to have ignored,” said market analyst Robert Rethfeld.
DAX follows weak Wall Street down
The interim recovery on the German stock market is over again. After US Federal Reserve Chairman Jerome Powell yesterday announced a significant interest rate hike of 50 basis points at the beginning of May, the domestic stock market went down significantly. The DAX was sucked into a weak Wall Street, but prices also fell in Asia.
In the end, the leading German index lost 2.48 percent to 14,142 points. Yesterday, the DAX had passed the 14,500 point mark and increased by almost one percent. In a weekly comparison, this results in an almost balanced balance. On Maundy Thursday, the index closed at 14,164 points.
“The turbulence in the markets continues, triggered by further comments from the US Federal Reserve Chair Jerome Powell,” wrote the experts at ING Bank. “Equities and bonds are sold simultaneously,” said portfolio manager Thomas Altmann from investment advisor QC Partners. “Everything that has an interest rate risk in any way flies out of the depots.”
“Last light” Covestro
Among the individual stocks in the DAX, Covestro was clearly at the end of the index, but this was primarily due to a dividend deduction of EUR 3.40. “Netto” was sold on, like the former Corona winners Delivery Hero and the online fashion retailer Zalando. Siemens Healthineers also fell more sharply.
On the other hand, HeidelbergCement was able to score points, the shares were at the top of the DAX with an increase of around three percent at times. They ended up up 0.8 percent. According to stockbrokers, the papers benefited from the good mood in the construction industry after the cement company Holcim had raised its sales outlook. Holcim stocks also rose significantly on the Swiss stock exchange.
Reporting season picks up speed
In the coming week, the “stock market bulls” must now hope for positive effects from the current reporting season. Eleven DAX companies alone present results. In doing so, investors are given the uncertain economic environment Pay particular attention to company forecasts.
A completely different type of political tremor could shake the financial markets as early as Sunday – should the right-wing populist Marine Le Pen, contrary to expectations, be elected President of France. Although lies Incumbent Emmanuel Macron ahead in polls. “In view of the fact that left-wing voters turn out in a election, which is difficult to predict, the potential for surprises should not be underestimated,” writes Ulf Krauss from Helaba.
euro is weakening
The euro exchange rate came under pressure on Friday after initially moderate gains. The common currency is suffering from the bad mood on the financial markets and was last listed at $ 1.0799 in US trading. The European Central Bank set the reference rate at 1.0817 (Thursday: 1.0887) dollars. The common currency has been weakening for some time due to the prospect of higher US interest rates. However, the ECB also recently gave initial, albeit still cautious, indications of a tightening of monetary policy.
“Following the recent statements by Fed boss Powell, even the very last market participant should be aware that the Fed will raise its key interest rate by 50 basis points in May and not (as in March) ‘only’ by 25 basis points,” said Commerzbank analyst Ulrich Leuchtmann .
Which not only put a further strain on the euro, but also on the bond market. The sell-off there continued unabated today. Ten-year federal bonds lost again and at 0.97 percent yields were higher than they had been in years.
Oil prices before another weekly minus
Meanwhile, oil prices fell moderately by around 0.7 percent. “Fears of an economic slump in China and a series of rate hikes in the US that is too rapid currently seem to be offsetting fears of a European energy embargo on Russia,” said Jeffrey Halley, an analyst at broker Oanda.
From the point of view of Commerzbank analyst Carsten Fritsch, the drop in oil supply from Russia due to the Ukraine war and the production losses in Libya should prevent the price from falling too sharply.
Rising interest rate expectations depress gold prices
The gold price cannot benefit from the increased risk aversion, after all the yellow precious metal is one of the losers of rising interest rates. The troy ounce of gold lost around 0.8 percent to 1934 dollars.
SAP shares down after slump in earnings
The SAP share was one of the biggest losers in the DAX. Europe’s largest software group suffered a 41 percent drop in profits to EUR 632 million in the first quarter. Investments in the expansion of the business with software for use over the network and the withdrawal from Russia weighed on the result. Sales, on the other hand, rose by eleven percent to almost 7.1 billion euros.
Rheinmetall shares hit new record high
Rheinmetall shares in the MDAX have meanwhile climbed by up to 3.4 percent to a record value of EUR 224.80, but still gave up the profits in late trading. A stockbroker refers to a price target increase by UBS. The analysts of the major Swiss bank now see the papers of the Düsseldorf armaments group at 251 euros. Since the beginning of the year, Rheinmetall stocks have already increased by 160 percent.
Eyewear group EssilorLuxottica with jump in sales
Fewer corona restrictions in many countries and the takeover of the Dutch optician Grandvision have driven the glasses group EssilorLuxottica with brands like Ray-Ban at the start of the year. The group increased sales in the first quarter year-on-year by 38 percent to 5.6 billion euros.
Amex increases revenues significantly
The credit card group American Express increased its revenue significantly by 29 percent to $11.7 billion in the first quarter, but profits fell back by 6.0 percent to $2.1 billion due to high costs for incentive and bonus programs. The share included in the Dow Jones fell 2.8 percent.
Verizon’s outlook doesn’t please
T-Mobile competitor Verizon, also from the leading index Dow Jones, has presented quarterly figures. However, these are not well received on the market, and the share lost 5.8 percent. Above all, the restrained outlook is a burden.
Earnings in 2022 are expected to be at the lower end of the targeted range of $5.40 to $5.55 per share. Sales will probably grow by nine instead of ten percent. Operating income remained stable at just under $7.8 billion. The bottom line is that profits fell by around an eighth to $4.7 billion, even though the group had to pay less taxes and interest.
The decline is primarily due to accounting effects, after the company booked expenses for pension obligations and early loan repayments in the volume of $900 million. The company also effectively lost 292,000 mobile contract customers, while its competitor AT&T had already reported a significant plus of 691,000 new contracts after deducting cancellations the day before.
Florida Republicans up pressure on Disney
Florida entertainment giant Walt Disney has come under pressure after criticism of an anti-LGBTQI school law. The state House of Representatives yesterday voted in favor of a bill that could have tax disadvantages for Disney. The text must now be submitted to Republican Governor Ron DeSantis for signature.
Musk talks to Thoma Bravo about Twitter purchase
According to a newspaper, Tesla boss Elon Musk is in talks with the investment company Thoma Bravo about a partnership in his planned takeover of Twitter. The company, which focuses on the technology industry, could be the key to Musk submitting a binding offer for the short message service, the New York Post reported.
Uber brings subscription service “One” to Berlin
For the first time, Uber is expanding its business model outside of North America with a kind of monthly subscription and is launching its “Uber One” service in Berlin. For subscribers, there are no delivery fees for the Uber Eat food delivery service. In addition, Uber grants a discount of five percent from a minimum order value of ten euros. In the case of travel agencies, the discount for subscribers is ten percent.