Wall Street, New York (GETTY IMAGES NORTH AMERICA/SPENCER PLATT)
The New York Stock Exchange finally ended in the red on Friday, cut in its tracks by the interruption of talks on the American debt ceiling which are now on “pause”.
The indices which had started in the green lost 0.33% for the Dow Jones at 33,426.63 points, 0.24% for the Nasdaq (12,657.90 points) and 0.15% for the S&P 500 (4,191.98 points).
The leader of the Republicans in the House of Representatives Kevin McCarthy showered the optimism which reigned the day before on the negotiations affirming at the end of the morning that they had to be put “on pause”.
A few moments earlier, the White House admitted to stumbling over “real differences” with the Republican opposition and indicated that the discussions were “difficult”.
The stakes are high since time is running out to authorize the United States to borrow again before June 1, otherwise the country could default on its debt, a catastrophic eventuality for the world financial markets.
Immediately after this news, equities reversed course, bond rates slowed their rise and above all, gold, the safe haven par excellence, jumped from 19 dollars to 1,978.90 dollars an ounce.
“The disappointment over debt negotiations is certainly” at the origin of the depression in equities, said Jack Ablin of Cresset Capital.
“What you have to look at is gold, it’s a very good barometer of the debt ceiling debate,” he added.
– Gold, the big beneficiary –
The analyst recalled that in 2011 when the United States had come close to defaulting to the point of seeing the debt rating of the world’s largest borrower lowered by a rating agency, gold had been “a big beneficiary”. panic in the markets.
“It’s the safe haven”, because in the event of a threat of default “the dollar will go down, bond yields will go down and equities will go down”, he warned.
On the bond market, yields on two-year Treasury bills lost some of their range to 4.29% against 4.33% in the first part of the session and 4.25% the day before.
Added to this pessimism about the talks between the administration and the White House were reactions to comments by US Treasury Secretary Janet Yellen on the banking sector that put investors off.
The latter said Thursday before a meeting of CEOs of major banks that other bank mergers might be “necessary”, according to echoes in the press published on Friday.
After the regional banking crisis which saw several establishments go out of business or be bought out in a hurry, these comments “suggested that the situation is perhaps worse than we think”, commented Jack Ablin.
Shares of regional banks, although up at the start of the session, took a nosedive like PacWest (-1.88%), Western Alliance (-2.44%) and Zions (-1.73%).
As for Jerome Powell, the head of the Fed, who spoke during a conference on monetary policy, he assured that “no decision” had been taken on interest rates for the next meeting of June.
For Edward Moya of Oanda, the Fed Chairman has “opened the way for a pause” in rate hikes. But for Pat O’Hare of Briefing, these statements were “flavorless”.
Listed, Disney fell 2.57% to 91.35 dollars after announcing that it was giving up the construction of a campus for its employees of nearly a billion dollars in Florida while the entertainment group is in full quarrel with the governor of the State, Ron DeSantis.
Morgan Stanley bank fell 2.66% after its CEO James Gorman, 64, announced on Friday that he intended to step down within the year, sparking a race for his succession.
Sports shoe retailer Foot Locker slumped 27.24% after disappointing first-quarter results and the retailer lowered its full-year earnings forecast.
Nasdaq