Wall Street uncertain at the start of a week full of events, primarily the announcement on rates by the Federal Reserve led by Jerome Powell.
At approximately 16.10 Italian time, the Dow Jones rose by 0.19%, the S&P 500 fell by 0.22%, the Nasdaq lost 0.68%.
The FOMC, the monetary policy arm of the Fed, will meet tomorrow January 31st to announce its rate decision the day after tomorrow February 1st. The market is betting on an increase of 25 basis points.
In the last meeting of 2022, the FOMC raised rates by 50 bp last month, bringing them to the range between 4.25% and 4.5% and slowing the pace of rate hikes after four consecutive tightening from 75 bp.
The latest projections by monetary policy makers – contained in the dot plot – indicate rates rising above 5% this year, a level they should remain at until 2024.
The US stock indexes are returning from a weekly rise, which confirmed the positive trend of the beginning of the year (YTD year to date).
Last week, the Nasdaq gained 4.3%, the S&P 500 rallied 2.5% and the Dow Jones advanced 1.8%.
Recent purchases contributed to January’s gains which, for the Dow Jones, S&P 500 and Nasdaq are +2.5%, +6.2%, +11.04%, respectively.
The great protagonist is the Nasdaq, which benefits from the return of investors on technology stocks and growth stocks.
The month of January also proves to be historic due to the strong recovery of cryptocurrencies: Bitcoin, in particular, is ready to end the best January since 2013, thanks to investors’ appetite for risk, rekindled by the belief that Jerome Powell’s Fed is close to ease its battle against inflation by raising rates less aggressively.
But is this bet really based on solid foundations?
Doubts about the Fed have been rekindled today by the rumors reported by Bloomberg, which speak of the biggest short bet that the world of hedge funds has ever launched against futures on Treasuries.
Such a powerful bet that it indicates that the speculative fund industry is not all that convinced that the rally that US government bonds have achieved so far has valid conditions for going forward.
On the government bond market, the yields on ten-year US Treasuries thus point upwards, rising to 3.55%, while the yields on two-year Treasuries jump to 4.61%.
During the week, quarterly reports from the likes of McDonald’s, General Motors, Apple, Meta Platforms, Amazon and Alphabet will be released.
In the meantime, a warning launched by Jerome Powell to the Fed so that it does not let its guard down too much against the growth of inflation has come from David Zervos, chief market strategist at Jefferies.
“Inflation has shocked the Fed to the upside – Zervos recalled, referring to how the Fed intervened late in its fight against inflationary pressures – It is therefore necessary that (the US central bank) be cautious about lowering rates too soon . And don’t believe that there will be two rate cuts in December. For now, the Fed is still a long way from intervening to prevent the very unlikely event of a hard landing from happening.”