Monday’s session brought strong declines in Wall Street, which were accompanied by a significant rise in the value of the dollar and an increase in government bond yields. This is a sign that the market is starting to doubt the Fed’s scenario.
The EUR/USD exchange rate fell below the 1-to-1 level, broke the July low and lifted the dollar to the strongest level in 20 years. US government bond yields rose. The yield on 10-year securities is back above 3%, and on 2-year securities it is 3.32%, back to the June peak.
These are clear signs that the market is slowly losing faith in the “peaceful” effort of the Federal Reserve. Over the past two months, Wall Street stock prices have risen precisely because some investors are beginning to speculate that the Federal Reserve will hold off on raising interest rates. Now that belief is starting to evaporate. The futures market, similar to June, estimates chances of a 75-from 50-pip rally at the September Open Market Committee meeting.
Investors will be looking for hints about the Fed’s next moves during Jay Powell’s speech on Friday At the annual symposium of central bankers, Jackson Hole. In anticipation of this event, aversion to owning stocks is growing. On Monday, the S&P500 fell 2.14% to 4,137.99 points. The Dow Jones Industrial Average fell 1.91% to 33,063.61 points.
Traditionally, high-growth companies, particularly sensitive to an increase in the discount rate, have been hit the hardest. Amazon was down 3.6%, nVidia was down 4.6% and Microsoft was down 2.9%. As a result, the Nasdaq fell by 2.55% and stopped at 12,381.57 points.
– Powell will try to appear “hard” to curb inflation expectations and tighten financial conditions. Thus, it is more likely to be a negative factor for the market – commented Jay Hatfield of Infrastructure Capital Management in New York, citing Reuters.
The sentiment on the stock exchanges was also marred by reports from Europe, where the energy crisis escalates with each passing day and week. Natural gas prices on the Dutch stock exchange It achieved the highest closing rate in history and is already 10 times higher than it was last spring. It happened after the Russian Gazprom announced the suspension of gas supplies to Germany for three days Through the gas pipeline Nord Stream 1 due to “maintenance work”. Electricity prices are also breaking absolute records in Europe, threatening to raise costs in industry and stagnate in the economy.
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