Futures contracts on the leading indices on Wall Street are down up to 1.2% following the declines recorded yesterday after the Fed’s interest rate announcement. Fed Chairman Jerome Powell raised the interest rate as expected by 0.5% to 4.5% – a 15-year high, but provided a disappointing forecast and raised inflation expectations, and expects that the interest rate at the end of the raising process will be 50 basis points above expectations.
Sami Shaar, the chief economist of the Swiss bank Lombard Odier said that “Powell showed an openness to further slowing the rate of increases in the coming months. The consumer price index data in November showed that inflation in the US is moving in the right direction, mainly in the goods sector due to the decrease in pressure on the supply chain, shipping costs and consumer demand as well as the drop in fuel and energy prices. Despite the Fed’s optimistic inflation estimates in the past, now it does not appear that there is a major risk of underestimation and at the same time the chairman did not push against the easing of economic conditions despite the increases in the stock markets, as he did after the previous rally.
“However, inflation in some service sectors has soared, and housing prices are still rising. We expect the Fed to raise interest rates by 25 basis points in the next two meetings, reaching a peak of 5% in the first quarter of the year, as it aims to see further slowdown in the housing and job markets. We believe the Fed will keep interest rates high throughout most of 2023 until they stabilize close enough to 2%. At this point, it is likely that interest rate cuts will begin when inflation reaches 3% levels, which we believe will happen only in 2024,” Shaar said.
In England, the Central Bank (BOE) raised the interest rate today as expected by 0.5% to a level of 3.5% – a record since 2008, thus the British bank which was the first among the leading banks in the West to raise the interest rate in the current cycle, slowed down the rate of increases. Only 7 members of the British Bank voted in favor of this increase, compared to 9 in the previous announcement. The Swiss National Bank (SNB) raised interest rates by 0.5% to 1% – in line with early forecasts.
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Tesla (NYSE: TSLA) last night completed a 30% drop since Elon Musk completed the acquisition of Twitter and a 55% year-to-date decline. Yesterday it was reported that Musk sold additional Tesla shares worth $3.6 billion.
Novavax (NYSE: NVAX) is down about 9% in pre-trade after the pharmaceutical manufacturer announced a capital raising of $125 million in shares, and another raising of a similar amount in convertible bonds.
Western Digital (NYSE: WDC) received a downgrade to ‘sell’ from investment bank Goldman Sachs, which expects a further decline in flash cards in the memory card market. The stock falls by about 5% in pre-trade.