US stock indexes are falling at the beginning of the session on Thursday after the growth the day before, investors are assessing macroeconomic statistics and the results of the meeting of the US Federal Reserve System (FRS) that ended the day before.
The value of the Dow Jones Industrial Average fell by 2.21% to 2,9991.34 points by 04:47 pm.
Standard & Poor’s 500 yen 2.48% – 3696.11 yen.
The Nasdaq Composite lost 2.55% to 10,816.64 points.
On Wednesday, the main US indices rose by more than 1%, despite a record increase in the Federal Reserve’s key rate since 1994 – by 75 basis points, to 1.5-1.75% per annum. Fed Chairman Jerome Powell signaled during a press conference following the meeting that the rate could also be raised by 75 bps in July.
“Of course, the record rate hike does not contribute to the growth of the stock market today, but the observed drop, apparently, is caused by fears that the Federal Reserve may accept the deterioration of economic conditions in the form of an impending recession and rising unemployment while trying to reduce the pressure caused by rising prices,” said ActivTrades analyst Pierre Veyre.
In addition, the market is concerned not only about the actual acceleration of inflation, which reached 8.6% in May, but also about the growth of inflation expectations, which Powell also pointed out in his speech.
Inflation expectations make members of the Federal Open Market Operations Committee (FOMC) nervous,” said Ryan Djajasaputra, an economist at Investec. “Powell said the Fed needs to take this trend seriously.”
Meanwhile, on Thursday it became known that the number of Americans who applied for unemployment benefits for the first time last week amounted to 229 thousand people, although analysts surveyed by Bloomberg expected a reduction to 216.5 thousand.
The number of houses, the construction of which was started in the United States in May, collapsed by 14.4% compared to the previous month and amounted to 1.549 million in terms of annual rates. According to the revised data, in April the number of new buildings amounted to 1.81 million, not 1.724 million, as previously reported, and experts predicted a decline to 1.701 million in May.
Investors are selling stocks, fearing that the US economy will slide into recession amid the tightening of the Fed’s monetary policy. Market sentiment worsened after the US Federal Reserve System (FRS) on June 15, following a two—day meeting, raised the rate by 75 basis points to 1.50–1.75% per annum. The rate increase immediately by 75 bps occurred for the first time in 28 years.
At first, the markets declined after the release of inflation data for May, but they reacted to the Fed’s decision with growth, which can be considered as closing positions after the event, admits Olga Belenkaya, head of the Macroeconomic analysis department at Finam. “We believe that in these conditions the risks for the markets are increasing, especially for high—risk assets, stocks with high values of market multipliers and weak current financial flows,” she added.
According to JPMorgan Chase & Co, the S&P 500 index now has an 85 percent probability of a recession in the United States. At the same time, annual inflation in the United States in May increased by 8.6% year-on-year, although analysts had predicted 8.3%. This is the highest growth rate since December 1981.
Shares of all 30 companies included in the calculation of the Dow Jones Industrial Average index are trading in the red. The leaders of the decline are American Express Co (NYSE:AXP). (-4.8%), as well as Dow Inc. and Caterpillar (NYSE:CAT) Inc. (-3.8%).
Tesla (NASDAQ:TSLA) shares are falling 4.1% in early trading in New York on Thursday on news that the American electric car manufacturer has raised prices for electric cars in the United States amid rising aluminum prices and a crisis in global supply chains.
The papers of the supplier of equipment for the production of semiconductor products KLA Corp. they are getting cheaper by 1.6%, despite the announced launch of a $6 billion share repurchase program.
The market value of Abbott Laboratories (NYSE:ABT) is down 2.8%. The pharmaceutical company announced the suspension of the production of infant formula at the plant in Michigan after the recent hurricanes that led to flooding at the enterprise.
The price of Boeing Co (NYSE:BA) shares. It is down 0.4% after Citi analysts improved the recommendation for shares of the aerospace giant to “buy” from “neutral”, while lowering the target price to $209 from $219.
Against the background of a general drop in the market by 4%, even the shares of the American retailer Kroger Co (NYSE:KR) are getting cheaper, which reported an increase in net profit in the last financial quarter by almost 5 times and improved forecasts for the current financial year.