The most excellent year-to-date outflow of global equities occurred on Friday due to hawkish central banks. Traders responded to hawkish comments from prominent bank officials and signs of slowing economic growth. As a result, the Dow plummeted 1,000 points after trading on Friday as part of the most significant two-day plunge.
IMF Spring Meetings panelist Jerome Powell told a panel that “front-loading” rate increases were a possibility and that a 50 basis point move would be on the table.” According to Harris Financial Group managing partner Jamie Cox, the remarks come at a critical moment.
According to the markets, a policy mistake by the Federal Reserve is becoming more likely. For example, if a Fed official recommends a 50 basis point rise in interest rates, “markets instantly begin attempting to price in 75 basis point rises,” said the economist. That is “madness,” in the truest sense of the word.
According to Cox, investors would be better to disregard the price madness and wait and see what happens with rates. The CME Group’s FedWatch program has a near-100 percent possibility of that magnitude of an increase early next month and a 90% chance of another similar move in June.
It’s becoming apparent to the Fed that a goal of 2% growth in the short future is unrealistic.” Because they can’t manage the known unknowns, like Ukraine and supply chains, as well as the knock-on impacts from China, they’re in a terrible place,” said Glenmede Investment Management director of fixed income Rob Daly.”
Dow Jones today ended at 33,811 points, down 981 points, or 2.82 percent, while the S&P 500 closed at 4,271.78 points, down 2.77 percent (335) points were wiped from the Nasdaq’s value.
Christine Lagarde, the head of the European Central Bank, also hinted that her colleagues might begin raising interest rates in July to rein in the highest inflation rates on record in the euro region.
Her remarks were made immediately before S&P Global’s PMI readings indicated a downturn in manufacturing activity in the area, although good service sector data is still giving support. In the latest PMI statistics for the United States, the tempo of activity has slowed back to where it was in January.
As traders re-set interest-rate-sensitive assets following Powell’s comments in Washington, which coincided with the most significant weekly outflow of equity market funds — $17.5 billion — so far this year, benchmark 10-year note yields jumped to 2.95 percent in overnight trading. In contrast, 2-year notes hit 2.762 percent, the highest since December 2018.
The dollar index, which measures the strength of the US currency against a basket of six other currencies, set a new two-year high of 101.95 in New York trade today. 10s traded at 2.987 percent, while 2s were last spotted at 2.694 percent.
TWTR shares jumped 3.93 percent after the New York Post reported that billionaire Tesla CEO Elon Musk might link up with private equity company Thoma Bravo in his $46.6 billion buyout attempt for the social media business.
After slashing its first-quarter sales estimate amid increased input prices and supply chain interruptions, apparel retailer Gap Inc. (GPS) saw its shares fall by 18.1%.
Get Snap, Inc. Class A Report shares initially dipped but closed the day up 1.2 percent as Snap warned that rising inflation and supply chain issues might hurt ad sales, even as it predicted strong user growth. ‘Ad sales could be hurt by the rising inflation and supply chain issues,’ it said.
As travel and entertainment spending surged to levels not seen since before the 2020 pandemic, American Express (AXP) – Get American Express Company Report edged 2.8 percent lower after reporting stronger-than-expected first-quarter earnings but only maintaining its full-year profit forecast.
