A New York Stock Exchange operator (GETTY IMAGES NORTH AMERICA/SPENCER PLATT)
The New York Stock Exchange ended lower on Wednesday, taken by a US central bank (Fed) with even more aggressive than expected monetary policy forecasts.
The Dow Jones lost 1.70%, the Nasdaq index dropped 1.79%, and the broader S&P 500 index fell 1.71%.
After oscillating between red and green, the indices sank into the red at the end of the session, to end at their lowest for the day.
The S&P 500 fell to its lowest level since mid-July.
The Fed raised its key rate by 0.75 percentage points on Wednesday to bring it to a range of 3% to 3.25%.
But more than this new turn of the screw, which was expected by economists, Wall Street was surprised by the new projections of central bankers in terms of rate changes.
Two-thirds of Fed members see the key rate rise above 4.50% next year, while operators have so far seen it mostly stay below this threshold.
Central bankers in Washington also rule out the possibility of a drop in this rate before 2024, while investors were counting on an easing in the second half of 2023.
“It was clearly a more aggressive Fed than anyone could have imagined,” commented Art Hogan of B. Riley Wealth Management.
For Greg Bassuk, of AXS Investment, the reaction of the New York market to this communication from the Fed “demonstrates the unease of investors, plagued by macroeconomic uncertainty” and “corporate earnings warnings”.
“We could see a continuation of recent trends by the end of the week, rates and the dollar rising, stocks and risk assets falling, as traders digest the Fed meeting,” said Matt. Weller from StoneX.
But for Art Hogan, the market also learned from Fed Chairman Jerome Powell’s press conference that the institution would decide its trajectory based on macroeconomic data.
“They have leeway and can be less aggressive if the data warrants it,” said Angelo Kourkafas of Edward Jones.
In addition, for the analyst, if the Fed has indeed drawn a higher than expected rate trajectory, it has only been “more aggressive than at the margin”. “This does not change the general tone”, that of a battle against inflation which will still last for many months.
A projection that investors had largely made their own since Jerome Powell’s speech in Jackson Hole (Wyoming) at the end of August, which had weighed on stocks and propelled bond yields skyward.
In support of his analysis, Angelo Kourkafas mentioned the bond market, which after an initial inflection immediately after the Fed’s publication, calmed things down.
The yield on ten-year US government bonds thus eased to 3.52%, against 3.56% the day before.
On the equities side, the slide at the end of the session was accentuated by the heavyweights of the rating, in particular technology stocks, which are having difficulty with the prospect of tougher financing conditions.
Apple (-2.03%), Amazon (-2.99%) and Meta (-2.72%) all lost more than 2%.
Statements by Russian President Vladimir Putin, who announced the partial mobilization of reservists and threatened to use nuclear weapons, helped defense sector stocks, including Lockheed Martin (-0.09%), Northrop Grumman (- 0.23%) and General Dynamics (-0.40%), to float.
Rare good surprise of the day, the agri-food giant General Mills (+ 5.72% to 79.72 dollars), which published a net profit higher than expectations and raised its forecasts for the whole of its staggered 2023 financial year, which s will be completed at the end of May.
The cosmetics group Coty was also sought (+ 3.21% to 8.04 dollars) after unveiling its strategic plan which provides for the doubling of sales of skincare products by 2025.
In the short term, the New York-based company has raised its revenue growth target for the first quarter of its staggered fiscal year 2023, which ends at the end of September.
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