At the beginning of the week, Wall Street continued to fall with concerns about interest rates and recession – albeit with reduced momentum.
At the beginning of the week, US investors were also concerned about drastic interest rate hikes and their consequences for the economy. The Dow Jones index lost 0.6 percent to 32,099 points after hitting a daily low of 31,973 points. The S
At the Jackson Hole central bank symposium on Friday, US Federal Reserve Chairman Jerome Powell prepared the financial markets for a longer series of significant interest rate hikes, sending the stock markets into a downward slide. The increased uncertainty among investors was also reflected in the volatility index, known as Wall Street’s fear meter, which climbed to a seven-week high.
Powell said on Friday tight monetary policy would be needed for “some time” to bring inflation under control. It shattered speculation that future rate hikes could be smaller as recent data suggested price pressures had peaked. “Between sessions, markets probably read a little too much into something that wasn’t – namely, that we were getting closer to a pause and possibly a cut in interest rates,” said Mike Mussio of FBB Capital Partners. “I expect volatility to be elevated for the foreseeable future, certainly between now and the September Fed meeting.”
Money market traders said there was a more than two-thirds chance of a third 75 basis point rate hike next month. The interest rate outlook allowed the dollar index, which reflects the exchange rate to major currencies, to jump by up to 0.6 percent to a 20-year high of 109.48 points. In the course of trading, however, the dollar index turned negative. Among other things, a rising euro made things difficult for him.
In view of the interest rate prospects, investors on the bond market parted with the currently traded, lower-yielding government bonds. Conversely, yields on two-year US bonds, which are particularly sensitive to interest rate expectations, briefly rose to a 15-year high. This has made technology and growth stocks in particular less attractive to investors, as their value is heavily dependent on future earnings, which are more heavily discounted as bond yields rise.
Heavyweights such as Apple, Microsoft, Tesla and Nvidia fell between 0.6 and 2.8 percent. On the other hand, there was a tailwind for the energy sector as the oil price continued to rise. Oil multinational Exxon Mobil rose 2.3 percent, Chevron’s shares rose 0.75 percent. This was triggered by speculation about reduced OPEC production volumes, which drove up the price of oil. Brent from the North Sea and US oil WTI rose in price by more than three percent to 104.86 and 96.92 dollars per barrel. Some members of the group of oil leaders have hinted that production would be cut if sanctions were eased if Iranian crude returned to the world market. However, this additional offer cannot compensate for the current bottlenecks, analyst Tina Teng from brokerage house CMC Markets pointed out.
Bucking the trend, the shares of the Chinese e-commerce group Pinduoduo also rose by around 15 percent. The online retailer recently turned over more than expected and now wants to expand internationally. Accordingly, the launch of a cross-border e-commerce platform is planned in the coming months, which is to target the USA as the first market.
