After several tough days on Wall Street, the mood yesterday clearly changed. Trading in New York ended Wednesday with a clear positive for the major indices. Tech-heavy Nasdaq was the weakest, rising 1.6 percent.
On Thursday, the mood was still positive from the start, but the trend turned to the downside throughout the day. At the close of trading, the three leading indicators were clearly in the red:
Commodity prices are rising
Russia’s war against Ukraine continues, as it is being fought diplomatically and economically. With the tightening of sanctions imposed by the West on the oil and gas-rich country, already pressurized energy prices continue to rise.
- The price of Brent crude from the North Sea has risen more than 2% in the past 24 hours, to more than $116 a barrel.
- The US benchmark West Texas Intermediate rose nearly three percent to more than $114 a barrel.
Prices for other raw materials have also risen sharply, from minerals to grain. The dollar is strengthening against other currencies, and gold is increasing in value.
The “king of bonds” warns against stocks
Global economic chaos has caused a problem for the US Federal Reserve, better known as the “Federal Reserve”. The disruption threatens to dampen economic growth, while higher commodity prices put more pressure on inflation.
On Wednesday, Federal Reserve Chairman Jerome Powell made clear that the central bank still intends to tighten monetary policy going forward, despite the turmoil. On Thursday, the latest figures on first-time applicants for unemployment benefits, which expired at 215,000 people. That’s 10,000 pieces less than the consensus, regarding an important indicator of how healthy the US labor market is.
The market is now reflecting an expectation of five rate increases of 0.25 percent this year, Bloomberg wrote.
“The Fed chief reassured risk markets by ruling out a 0.50 per cent rate hike in March, while promising to be on the lookout for future inflation,” Citigroup strategists William O’Donnell and Edward Acton wrote in a note from the same news. an agency.
A recent photo of “Bond King” Bill Gross and his wife Amy Schwartz in connection with a lawsuit from neighboring California. (Photo: Patrick T. Fallon)
Investor legend Bill Gross, 77, known as the “King of Bonds,” believes the strategy is risky. He says raising interest rates could dampen the economy too much and trigger panic in financial markets, and sees the possibility of stagflation on the horizon. This means that the economy stops growing, i.e. stagnates, at the same time that inflation is high and persistent.
Thus, Gross cautions against buying the stock on the day.
I simply say it’s a realistic assumption that the stock market was driven, perhaps by 30-40 percent, with low interest rates. Gross said in an interview: CNBC.(Terms)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.
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