Frankfurt, New York Investors are selling US stocks out of fear of a dwindling flood of money from the Fed and rising interest rates. Disappointing economic data also hit their mood on Tuesday. At the moment everything seems to be falling on the stock exchanges at once: possible tax hikes, rising inflation, the spread of the delta variant of the corona virus, said Ken Mahoney, head of wealth manager Mahoney.
The US standard value index Dow Jones closed 1.6 percent lower to 34,299 points. The technology-heavy Nasdaq was down 2.8 percent to 14,546 points. The broad S&P 500 lost two percent to 4,352 points. According to experts, rising inflation and higher interest rates will devalue future profits of high-growth technology companies.
Investors also sold US Treasuries, pushing the yield on trend-setting ten-year US bonds to a three-and-a-half-month high of plus 1.567 percent. This would make bonds a competition for stocks again, added stock market expert Mahoney. “That was not an issue for investors in the past few years.”
Fed is likely to tighten the reins soon
Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen warned at a Senate hearing that default by the US due to failure to raise the debt ceiling would have disastrous consequences. Democratic leaders are debating how to raise the debt ceiling after Yellen warned that her department will effectively run out of money around October 18 unless Congress suspends or increases the ceiling.
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The rise in interest rates in the USA comes from rising inflation expectations and the planned tightening of monetary policy by the US Federal Reserve. New economic data reflect the increasing skepticism about the planned monetary policy direction of the USA. Real estate prices rose by almost 20 percent in July.
Powell’s latest statements signaled growing nervousness about inflation, said economist Sarah Hewin of the bank Standard Chartered. Investors feared that the temporary price-driving factors would develop into permanent ones.
Stockbrokers assume that the Fed will raise interest rates as early as 2022. This lifted the dollar index, which reflects the exchange rate to major currencies, at times to an eleven-month high of 93.806 points.
At the same time, the decline in US consumer confidence to its lowest level since February dampened corporate earnings prospects. Private consumption is considered to be the mainstay of the world’s largest economy.
Another negative factor for the mood is the imbalance of the real estate company China Evergrande and the energy crisis in the People’s Republic, said Gianclaudio Torlizzi, partner in the consulting firm T-Commodity.
Due to a shortage of coal and to reduce emissions, the Beijing government is forcing companies to cut production. According to experts, this fueled fears of a weakening of the global upswing.
The dispute over raising the US debt ceiling was also a headache for some stockbrokers. If Congress does not decide on such a step by Thursday, there is a threat of a government shutdown from Friday, the closure of numerous authorities. So far, the bickering has been viewed as a political skirmish, said Jason Pride, chief investor at asset manager Glenmede. But if this deadline expires and no agreement is found by the third week of October, the topic will determine the course. According to experts, the US could then become insolvent.
Ford’s electric car plans are electrifying investors
Bucking the trend, Ford’s shares rose 1.1 percent. The car manufacturer is investing around 11.4 billion dollars with its South Korean partner SK Innovation in the construction of an electric version of its bestseller, the F-150 pickup, as well as in battery production facilities.
These expenses are apparently part of the $ 30 billion investment package for e-cars, commented analyst David Whiston from the research company Morningstar. Therefore, his assessment of the company remains unchanged.
Look at individual values
Oil: As on the previous day, oil stocks were among the most sought-after stocks among the individual stocks. Chevron’s paper at the top of the Dow rose around 0.4 percent. Exxon Mobil and ConocoPhillips shares rose 1.1 and 1.6 percent, respectively.
Tech: In contrast, many heavily weighted technology papers sagged significantly. Microsoft’s shares fell 3.6 percent at the end of the Dow. Apple shares lost 2.4 percent, the titles of Facebook and the Google parent Alphabet slipped by around 3.7 percent each.
Digital Brands: Digital Brands titles jumped more than 19 percent. The company, which specializes in luxury fashion made of denim, is forecasting a sales increase of 350 percent to 37.5 to 42.5 million dollars for 2022.
Thor Industries: The recreational vehicle manufacturer, which also owns the German Hymer Group, reported quarterly earnings of $ 4.12 per share, beating the consensus estimate of $ 2.92. According to the company, the demand for mobile homes remains high and the order backlog has reached a record high. The shares rose 8.1 percent.
Applied Materials: The shares slipped by almost 6.9 percent because the analysis house New Street downgraded the stocks “buy” to “neutral”, pointing to the record valuation and the limited price potential of the manufacturer of semiconductor manufacturing equipment.
Aurora Cannabis: The Canada-based cannabis producer reported lower-than-expected quarterly sales as sales of cannabis to consumers fell 45 percent year over year. The company cited Covid-19 restrictions as a primary reason for the decline. The stocks of Aurora Cannabis initially fell significantly, but then turned up to 5.8 percent in positive territory.
Endeavor Group: The enterprise buys sports betting provider Openbet from Scientific Games for $ 1.2 billion in cash and stocks. The owner of the Ultimate Fighting Championship plans to combine Openbet with its existing sports betting business. Endeavor shares rose over three percent.
Merck: According to a report in the Wall Street Journal, the company is on the verge of acquiring drug maker Acceleron Pharma. Acceleron papers rose 2.3 percent, Merck papers fell 0.8 percent.
Spotify: The enterprise launched a global campaign to increase its advertising revenue. The new campaign of the music streaming service targets small and medium-sized companies that have not previously been the focus of the company. The share lost 2.3 percent in a weak market environment for technology stocks.
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