Wall Street rebounds after post-Fed losses suffered last week. The Dow Jones jumped over +200 points at the start of the session: now it is advancing by more than 166 points (+ 0.50%), to 33,457 points. The S&P 500 rose 0.28% to 4,177 points, while the Nasdaq fell 0.20% to around 14,000 points. The Dow Jones recovered from the worst week since last October, mainly caused by market anxiety over a QE tapering and a Fed rate hike earlier than expected. Over the past five sessions, on a weekly basis, the Dow Jones has capitulated 3.45%; the S&P 500 suffered its worst loss since the end of February. The Nasdaq also ended the week in the red, but below the all-time record of just -1.28%.
In addition to the outcome of the FOMC meeting – the Fed’s monetary policy arm – from which it emerged that the Fed exponents now expect two rate hikes in 2023, when in March they estimated interest rates at least until 2024, were last Friday the statements of James Bullard, president of the St. Louis Fed, who said he saw a first monetary tightening already in 2022, or already next year. According to Bullard, the pandemic is about to end and it is natural that at some point stimuli will be reduced and the central bank will become more hawkish to contain inflationary pressures.
Bullard estimates inflation to run at 3% this year and 2.5% in 2022 before returning to the Fed’s 2% target.
His words caused a flattening of the US yield curve.
Measured by the spread between two-year and 30-year rates, the yield curve has become the flattest since the beginning of February.
On the one hand, 30-year Treasury rates dropped below 2% after Bullard’s comments, dropping to 1.9990% for the first time in more than four months; 10-year Treasury rates also collapsed, with yields slipping to a minimum since the beginning of March, to 1.4110%, now rising to 1.47%. On the other hand, two-year Treasury rates, the ones most affected by changes in monetary policy, discounted more the prospect of the most imminent US rate hike, rising to 0.256%, thus bringing back last week the strongest weekly gain in two years.
The more hawkish signals from Bullard sent the dollar also surging last Friday, with the result that the euro also pierced the $ 1.19 threshold, which has now been regained.
The Dollar Index jumped to 92.405 during that session, the record since last April 13th. But now the pace is slowing, with the euro-dollar ratio advancing 0.36% to $ 1.1907.
Also recovering is the pound, up 0.62% to $ 1.3895 after sinking more than 2% against the greenback last week.
Waiting for the Bank of England meeting, scheduled for Thursday 24 June: the BoE is also facing the dilemma of inflation, after the jump in the consumer price index – inflation thermometer -, which flew to the United Kingdom in May 2.1%, above the central bank’s target threshold of 2%, for the first time in nearly two years.
Returning to the US stock exchange, the shares of companies active in the commodities sector recovered, in particular the oil Exxon and Chevron, which rose by approximately 1%.
On Wall Street, the shares of groups benefiting from the reopening trade, such as Boeing, are doing well.
Recovery also for bankers, such as for JP Morgan, Citigroup, Bank of America.
Last week, the financial and materials sectors had sunk by more than 6%, the energy sector by more than 5%, while industrials had lost more than 3%.
Among the Big Tech turnarounds from Apple, Amazon, Microsoft and Tesla.
Crypto stocks listed on Wall Street are down, with MicroStrategy sinking to -9%, and Coinbase sliding to nearly -4%.
The stocks discounted Bitcoin’s tumble, which fell as much as -7%, below the $ 33,000 mark for the first time since June 8, to $ 32,801.
The number one cryptocurrency in the world was affected by the crackdown on China’s wall mining which, according to rumors, would have spread to the south-western province of Sichuan.