Wall Street is taking a break from last week’s unleashed rally fueled by the index release
US CPI in October, which confirmed the slowdown in inflation growth.
At 15.50 Italian time, the Dow Jones oscillates just below parity, at 33,725 points; the S&P 500 fell 0.51% to 3,972; the Nasdaq lost more than 1%, at 11,761 points.
Perhaps US-made inflation really left its peak behind, thanks to the roundup of rate hikes by the Fed led by Jerome Powell. The CPI index showed inflation rose on an annual basis, in October, of 7.7%, from the previous rise of 8.2% in September and compared to the + 8% expected by the consensus. The growth in core inflation also decreased, which, on an annual basis, went from the rise to the maximum rate of the last 40 years, equal to + 6.6% in September, to + 6.3% in October.
Investors immediately bet on the arrival of less aggressive tightening maneuvers by the Fed of Jerome Powell in the meeting in mid-December, after four consecutive hikes of 75 basis points since the beginning of the year. On November 2, the Fed raised rates by 75 basis points, taking them from the range between 3% and 3.25% to the new range between 3.75% and 4%, a record value since 2008.
The euphoria of investors to learn of the slowdown in inflation growth was such that, on the day the data was released, which is last Thursday, the Dow Jones flew around 1,201 points, rallying by 3. 70%; the S&P 500 jumped 5.54% while the Nasdaq Composite jumped 7.35%.
As a result, on a weekly basis, the Nasdaq jumped 8.1% last week, reporting the best weekly trend since March, while the Dow Jones was up 4.2%. The S&P 500 took its best week since June, with a 5.9% rally.
“A notable change has occurred in the markets, with investors returning to be risk on in different asset classes – commented Mark Hackett, head of Nationwide’s investment research division – The technical analysis indicators are definitely improved, with investor sentiment, momentum, and risk factors all showing a noticeable improvement ”.
However, a warning not to believe too much that the Fed’s battle against inflation is coming to an end came yesterday from Fed Governor Christopher Waller. Waller said the fact that the US central bank could raise rates at a slower pace at the next FOMC meeting – its monetary policy arm – should not be interpreted as a possible imminent decision by the institution to lay down its arms in countering. the flares of inflation:
“Stop paying attention to the speed (of hikes) and start paying attention to what the final rate (terminal rate) will be. Until we can bring inflation down, the end (of monetary tightening) will remain far away, ”Waller stressed.
But beware of Morgan Stanley’s view, which suggests a collapse in US inflation over the next year.
“US inflation as measured by the CPI consumer price index is currently 7.7% yoy, but we expect it to fall below the 2% threshold by the end of next year ( therefore, below the Fed’s inflation target). This is what the strategists of the American banking giant estimate.
“We believe that the Fed will stop its path of rate hikes, after a monetary tightening, in January, equal to 4.625%”, reads the Morgan Stanley report, which suggests that the Fed, once inflation of the United States will have fallen below the 2% target, will return to cut rates on fed funds.
Among the titles protagonists of today’s session, attention to Amazon, after the note from Bank of America, which announced that it had removed the name of the e-commerce giant from the list of the best investment ideas, the so-called US 1, where they are present the top pick stocks that received a buy rating from the analysts of the American giant.
Amazon retained that rating, but it no longer appears in the ranking of securities that Bank of America considers among the best.
And so the Amazon stock loses more than 3%, after losing 39.5% since the beginning of the year.