James Bullard effect on Wall Street and the US Treasuries market. The St Louis Fed chairman dashed the hopes of those who had hoped for less aggressive rate hikes by the Federal Reserve.
“Rates are not yet in an area where they can be considered tight enough – Bullard said – The change in monetary policy appears to have only limited the effects of inflation, but markets are pricing in disinflation in 2023,” he added. the Fed official.
The reaction of US Treasury interest rates was immediate, which returned to looking at a more hawkish Fed, changing direction.
The latest US inflation macro data had fueled hopes of less monetary tightening than Jerome Powell & Co.’s four consecutive 75 basis point rate hikes. Bullard’s comments have investors rethinking the picture.
Yields on 10-year US Treasuries, which last week breached the 4% threshold, thus rise to 3.782%, while those on two years are affected by the Bullard effect, jumping to 4.42%.
“Further monetary tightening and the overall impact of this year’s rate hikes suggest that the risks of a recession remain elevated,” Mark Haefele, head of the investment division at UBS Global Wealth Management, commented in a note reported by CNBC. to believe that the macroeconomic preconditions necessary for a sustainable rally – those of interest rate cuts and an economy and corporate earnings bottoming – have not yet arrived”.
Wall Street closed yesterday in the red, with the S&P 500 down 0.83% to 3,958.79, the Nasdaq Composite down 1.54% to 11,183.66 and the Dow Jones Industrial Average flat, down by 39.09 points, -0.12% to 33,553.83.
The publication of the quarterly report by Target, a US retail company, has rekindled fears on the eve of a recession in the United States.
The company confirmed the negative impact of inflation on American consumers’ propensity to buy, announcing a profit plunge of about 50%, on the back of the increase in inventories and the slowdown in sales.
The rise in Treasury yields and the prospect of a hawkish Fed for a long time to come depress share prices, which reflect the fear of a recession, which has never fully subsided.
At 15.45 Italian time, the Dow Jones lost more than 240 points (-0.73%), the S&P 500 retreated by more than 1% and the Nasdaq retreated by 1.2%.