A smooth start for Wall Street after yesterday’s increases, triggered by Jerome Powell’s opening to a slowdown in the pace of monetary tightening as early as the December meeting. After a few minutes of trading, the Dow Jones fell by 0.5% while the S&P500 (+0.1%) and the Nasdaq (+0.4%) were trading above parity.
Before the opening, the October data on the core PCE index, the parameter preferred by the Fed to monitor inflation, was released, which stood at +5.0% per annum, below the +5.2% of September. The numbers support the views of those who believe that US inflation has reached its peak and that the Fed could launch less aggressive rate hikes.
Powell himself, chairman of the Washington institute, declared yesterday that “it makes sense to moderate the pace of interest rate hikes”. The intensity of the monetary tightening could decrease as early as the next meeting of the FOMC, scheduled for the next 13 and 14 December. In any case, the number one of the American central bank clarified that “there is still work to be done” and “there is likely to be a need to maintain the restrictive policy for a while yet”, in order to fight inflation.
Many economists have warned investors, recalling that the slowdown in tightening does not exclude Powell’s determination to aim for a higher terminal rate than he himself had previously forecast.
In any case, the prospect of a 50 basis point hike in December also triggered purchases on US Treasuries, with yields pointing downwards. US Treasury yields continue to fall with 10-year yields falling to 3.61%. The US dollar was also down, making a strong about-face, leading the euro to $1.0523, its highest level since the end of June.
The data on weekly unemployment claims also came from the macroeconomic agenda, equal to 225,000 units against 241,000 the previous week and the 235,000 expected. Consumer spending rose 0.8% month-on-month in October, fueling hopes that the Fed’s hikes are cooling inflation without triggering a recession.
Now the focus shifts to tomorrow’s data relating to the stars and stripes job market, after yesterday’s ADP data which highlighted a lower number of jobs in the private sector than estimated.
Among the most active stocks, cloud computing firm Salesforce fell 9.5% on news of the resignation of co-CEO Bret Taylor. On the other hand, Snowflake (also a cloud company) rose after the quarterly report, despite the guidance on turnover below expectations.