Wall Street is once again discounting fears of a Fed that is still aggressive on rates: so aggressive as to cause a sharp recession. Fears were rekindled by the release of the third quarter US GDP data and further fueled by today’s inflation data.
Yesterday the latest revision of the GDP was announced, with which the growth of the data was revised upwards to +3.2%, from +2.9% of the previous reading, beyond the expectations of a growth equal to +2.9%.
The figure revealed how the fundamentals of the US economy remain solid, despite Jerome Powell’s Fed’s attempts to scuttle it – to dampen inflation – with repeated monetary tightening.
The fear of higher interest rates for much longer returns to Wall Street: yesterday the Dow Jones closed the vigil session down by 348.99 points (-1.05%), at 33,027.49 points; the S&P 500 retreated 1.45% to 3,822.39 points, while the Nasdaq was down 2.18% to 10,476.12.
Today, another no session for the US stock market which failed in this 2022 to bring back a Christmas rally.
Far from it: the S&P 500 is preparing to end the week down by 0.8%, in the red for the third consecutive week. The Nasdaq Composite lost 2.1% on a weekly basis, while the Dow Jones managed to dodge the negative balance, with a timid increase of 0.3%.
The performance in December was decidedly negative: the S&P 500 slipped by more than 6%, the Dow Jones dropped 4.5% and the Nasdaq collapsed by as much as 8.7%.
It must be said that today the data preferred by the Fed for monitoring the inflation trend, and therefore for making decisions on rates on fed funds, does not help at all: the core PCE price index, published before the start of the session, it rose 4.7% in November, in line with expectations but still a solid rally. Other economists, such as those consulted by Dow Jones, had forecast, among other things, a lower increase on an annual basis, equal to +4.6%.
It must be said that the indicator has eased its course compared to the previous 5% rise.
On a monthly basis, however, US inflation measured by core PCE rose by 0.2%, as expected, and at the same pace as the previous month.
The PCE headline instead advanced on an annual basis by 5.5%, compared to +6% in October (revised downwards from the previously announced increase of +6.1%), rising on a monthly basis by 0.1%. %, slower than the previous 0.3% increase.
On the government bond market, yields on 10-year US Treasuries strengthened to 3.745%, while those over two years, more sensitive to the Fed’s monetary policy decisions, showed little change at 4.281%.