new York The latest US inflation data weighed on Wall Street on Wednesday. The US standard value index Dow Jones closed one percent lower at 31,834 points. The broad S&P 500 lost 1.6 percent to 3935 points. The tech-heavy Nasdaq fell 3.2 percent to 11,364 points. According to experts, higher interest rates will devalue the future profits of these high-growth companies.
However, the figures probably do not change the fact that the Federal Reserve will raise the key interest rate by half a percentage point in June, said investment strategist Michael Hewson from brokerage house CMC Markets. However, the prices on the futures market signaled that the majority of investors were expecting a step of 0.75 percentage points.
Against the background of the ongoing discussions about an EU embargo on Russian oil imports, the price for the US variety WTI rose 5.84 percent to $105.59 per barrel (159 liters). Should the EU agree on an embargo, a further rise in the price must be expected, predicted Andrew Lipow, head of the consulting firm Lipow Oil.
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Fear of the “Perfect Storm”
There is concern among market analysts and central bankers that the US economy could slide into recession if the Fed tries to curb inflation. The analysts at the investment bank Morgan Stanley expect nothing less than a “perfect storm” on the markets for 2022.
“We expect growth to slow while inflation remains high and widening,” they wrote in a new analysis. “The labor market remains relatively tight, and wages are rising in view of the high inflation.” According to the analysts, not only the Fed is forced to react, but also the European Central Bank (ECB). “We expect that by 2023 the ECB will [drei] rate hikes.”
“The Russian invasion of Ukraine and its effects, especially on energy prices and supply, are the main reasons for a sharp downward revision of growth,” predict the Morgan-Stanley experts for the second half of the year. Added to this is the difficult situation of households, whose income is falling due to inflation and high energy prices. A quick remedy is therefore not in sight: “There are clear signs that inflationary pressure is expanding.”
Michael Farr, managing director of the investment consultancy Farr, Miller & Washington, expects very volatile markets in the coming months. Inflation won’t go down anytime soon: “According to the Fed, we’re not yet at the end of this process that everyone wants,” the Wall Street Journal quotes him as saying.
Persistent nervous markets
Volatile markets are likely to react violently to any headline suggesting continued price pressure, said David Kotok, chief investment officer at Cumberland Advisors. “We are in crazy times.”
Wall Street observers expect that more speculative investments, such as growth and tech stocks as well as cryptocurrencies, will suffer as a result. Higher interest rates should lead to higher yields on safe investments. The Fed hiked interest rates by half a percentage point last week – the biggest hike since 2000.
“If we just had rising interest rates, or just high inflation, or just China, or just Ukraine, we could probably handle that,” said Daniel Morris, chief markets strategist at BNP Paribas Asset Management. “But we have all of that at the same time. That’s why the environment is so particularly challenging.”
Coinbase was one of the biggest losers in the US stock market on Wednesday. The shares of the cryptocurrency exchange posted a record price drop of almost 28 percent at times due to the slide into the red and at $ 52.80 they were cheaper than ever since the IPO about a year ago. In the end there was still a minus of a good 26 percent. In addition, customer growth is slowing down, commented analyst Bo Pei from brokerage house US Tiger. This indicates that most consumers continue to regard Bitcoin and Co as speculative investments.
Individual values in focus
Moderna: The US biotech company Moderna, known for its corona vaccine, fired its chief financial officer, Jorge Gomez, almost immediately after he took office. The reason is an internal investigation into financial reports from his previous employer Dentsply Sirona, Moderna announced on Wednesday.
Gomez only started the job this Monday. After Dentsply Sirona made the investigation public on Tuesday, he was rid of him again on Wednesday. Nevertheless, Moderna will pay Gomez $ 700,000 (a good 664,000 euros) in compensation, according to a stock exchange announcement. However, he waives his sign-on bonus and bonus claims. Moderna stock fell 6.72 percent on Wednesday.
Rivian: The US electric-vehicle maker stuck to its 2022 production target on Wednesday, despite concerns over supply chain issues. We are still well on the way to building 25,000 vehicles this year. Rivian reported higher reservations and a higher first-quarter loss, which was also lower than Wall Street had expected. The stock was up 8 percent in after-hours trading.
Wendy’s: The company reported adjusted earnings of 17 cents per share, down a cent on estimates. Revenue and sales also fell short of analysts’ forecasts. The restaurant chain sees a negative impact from higher costs for supplies and labor. Shares slipped 11.22 percent.
Wall Street expert Koch: “The stock market is under pressure”
Roblox: The company reported a bigger-than-expected loss for its most recent quarter and revenue that fell short of the stock market’s forecasts. Roblox, which operates gaming platforms, also expects further losses for the foreseeable future. The stock rose 3.36 percent.
Unity Software: The papers fell by 36.91 percent. The video game software developer issued a weaker-than-expected sales forecast. Quarterly loss was in line with estimates, but revenue was below consensus.
Occidental Petroleum: The stock rose 1.16 percent after the company’s profit for the past quarter beat expectations thanks to rising oil prices. Occidental is the top gainer among S&P 500 stocks, having more than doubled this year.
Wendy’s: The company’s stocks fell more than 11 percent. Due to Corona and winter storms in the USA, the sales of the fast-food restaurant chain rose by only 1.1 percent at the beginning of the year. Analysts had expected double that. However, foreign business is going better than expected, analyst Andrew Charles from asset manager Cowen pointed out. The company also reaffirmed its full-year targets.
With material from Reuters.
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