Fear of inflation sends Wall Street red

Time.news – Wall Street thud in the penultimate session of the week after the words of Federal Reserve Chairman Jerome Powell on the possible resumption of inflation with the reopenings. The lists had opened in mixed territory and then turned even positive in mid-morning. Shortly after, however, Powell spoke at the Wall Street Journal’s Job Summit and said that the Fed expects “an increase in inflation” with everyone resuming economic activity, but that it will be “transitory”. That was enough to light the fuse on the New York lists: the Dow Jones closed at -1.11% at 30.923 basis points, the S&P 500 at -1.28% at 3.770 points, worse is the Nasdaq which falls by 2, 11% at 12,723 basis points.

The nervousness of the markets was also accentuated by the growth rate of return on 10-year US Treasury bonds which jumped by 1.55%, to the highest levels of the week and close to last year’s highs. An alarm for investors who have triggered a strong sell off on equities. It was the Nasdaq that paid the most of all. Investors in tech stocks generally have to wait longer to recover their investments, because their bet is on the long-term impact of technologies. An unattractive scenario during times of inflation, where money today may be worth more than it will be worth tomorrow.

Among the best known, Apple lost 1.47%, Twitter 5.84% while Amazon dropped 0.81%. But fears of a possible rise in inflation were felt throughout the week. A rapid recovery of the economy is something that has inflated the sails of the lists in recent months, but the specter of an inflationary spiral has radically changed the mood of the markets.

Powell once again tried to minimize, noting that there is “a difference between a one-time price hike and ongoing inflation,” promising that the Fed will not take action to raise interest rates until the economy returns to maximum employment. ” we intend to raise interest rates until we see these conditions met, “said the head of the US central bank.

© Eric Baradat / AFP

Federal Reserve Chairman Jerome Powell

But analysts consider his words insufficient. For Karl Haeling of Lbbw, the markets were hoping for “something stronger”, including some deals to help contain the sell-off in bonds. “We do not know at the moment if this is just a disappointment reaction or if this is really the beginning of a new phase of rising bond yields,” he told AFP. Tomorrow already seems a decisive session to understand the mood of investors. And perhaps the trends of the coming months.

Employment data also weighed on investor mood, with the number of Americans applying for unemployment benefits last week on the rise, probably due to the winter storms that have paralyzed the densely populated southern states, although the prospects for the labor market are improving with the decline of new cases of Covid-19.

On the other hand, the price of oil closed with a sharp rise. In New York WTI prices rose by 4.10% to 63.79 dollars a barrel. In London, Brent gains 4.07% and changes hands at $ 66.68. The hikes come in the wake of the OPEC + agreement where it was decided to wait for the economic recovery to strengthen and for the anti-Covid-19 vaccination plans to extend globally before increasing the production of crude oil on the world market.

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