Wall Street suffers a sharp drop after the Fed's rate hike announcement
Logo of the New York Stock Exchange (NYSE, in its English acronym), this Wednesday on the parquet.
Logo of the New York Stock Exchange (NYSE, in its English acronym), this Wednesday on the parquet.Seth Wenig (AP)

The stock indices of the United States have fallen again this Thursday, with the shares of the big technology companies in the lead, after the day before the Federal Reserve (Fed) announced the largest increase in the price of money since 1994 to combat inflation in highs, a move that raises fears of a recession. Interest rates are now in a range of 1.5% to 1.75% and further rises are expected in the next meetings in July and September, although Jerome Powell, chairman of the Fed, reassured investors that he would not they will be common.

Among the biggest losers are representatives of the Nasdaq Composite Index, which together lost 3.85%, such as Apple, Microsoft and Tesla, after investors abandoned the so-called growth stocks that had fueled the expansion of the stock market in the past few years. last two years. The index that brings together the main companies, the S&P 500, has dropped 3.03% while the industrial Dow has moderate its fall to 2.24%.

Together, the benchmark index has lost 22.9% so far this year and has entered a downward trend, while the Nasdaq Composite and S&P 500 indices have accumulated ten weeks of decline in the last eleven. Both the Dow Jones and the S&P 500 hit their lowest levels since January. The second, in particular, is now more than 23% below its peak of January 3 and on the verge of registering its worst quarter since 2008, when the global financial crisis known as the Great Recession hit.

Among the big technology companies, the decline of Apple stands out, with a drop of 3.32% that threatened to fall below its symbolic threshold of capitalization, three billion dollars, reached at the beginning of the year. Since its peak in early January, the apple company’s valuation has discounted more than $800 billion. Netflix, down 4.11%, is approaching its lowest capitalization in five years.

With inflation in the US reaching 8.6% in May, central banks are making borrowing more expensive to discourage spending, from new homes to loans for new or used cars – a market the latter that has contributed to overheating the economy. in recent months – but doing so will also slow economic growth and threaten corporate profits, as evidenced by retailer Target’s 1.8% drop despite aggressive consumer offerings. It’s not just used cars that have fueled inflation, so has home buying, with average mortgage rates soaring to 5.8% on Thursday from just over 3%. That’s the highest level for 30-year fixed-income mortgages since 2008, according to Freddie Mac.

Hence, the horizon of a recession -or at least stagflation, a period marked by high inflation and low growth- seems ever closer. As published on Wednesday by the Bloomberg agency, this is a very likely scenario in the first quarter of 2014. Wells Fargo points out that the chances of a “moderate” recession now exceed 50%, and that it will probably materialize in mid-2023. Other banks that have warned of recession risks include Deutsche Bank and Morgan Stanley.

He knows in depth all the sides of the coin.

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