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Significant losses: Wall Street finds no support

market report

Status: 22.04.2022 22:32

US markets started the weekend with significant losses. They did not recover from the announcement of a significant rate hike by Fed Chairman Powell the day before.

The prospect of a sharp rise in interest rates by the US Federal Reserve (Fed) has hit US investors’ sentiment hard. All major stock indices ended trading at a loss. They continued the decline that began the day before the meeting after Fed Chairman Jerome Powell announced an increase of 50 basis points for the upcoming Fed meeting on May 4. The stock market is also burdened by unsatisfactory business numbers of some companies.

The Dow Jones index closed at 33,811 points 2.82 percent lower. The broad S&P 500 index fell 2.77 percent to 4,271 points. The technologically demanding Nasdaq also fell sharply by 2.55 percent to 12,839 points, as did the selected Nasdaq 100 index, which closed 2.65 percent at 13,356 points.

“The market fears the Fed is raising inflation concerns too much and could lose profits in the future,” said Peter Cardillo, chief economist at Spartan Investment.

Losses on the bond market

In this context, US government bonds also jumped out of the depot. That drove 10-year government bond yields to a peak of 2.974 percent, close to a recent three-and-a-half-year high. The 3.0 percent mark is getting closer and closer.

Jerome Powell spoils the stock market

The day before, at an International Monetary Fund (IMF) event in Washington, the head of the US Federal Reserve at the forthcoming Fed meeting in early May spoke very clearly in favor of raising the key interest rate by 50 basis points. Powell thus raised concerns in the markets that an aggressive rate hike by the Federal Reserve (Fed) could halt the economy.

Its goal is to “reduce inflation without triggering a recession.” He continued: “I don’t think you will hear anyone from the Fed say that it will be straightforward or easy. It will be very difficult.”

Economic update from 22.04.2022

Klaus-Rainer Jackisch, HR, tagesschau24 09:00, April 22, 2022

Are markets overreacting?

However, the violent reaction of investors was a surprise. Because a large rate hike by the Fed was expected in the markets weeks after the previously high inflation rate. It is possible that markets are overreacting. In fact, investors should have expected rising interest rates long ago. “In the end, Powell was just clarifying what the Fed’s futures were suggesting, but some market participants seem to have ignored them,” said market analyst Robert Rethfeld.

The DAX follows the weak Wall Street down

The temporary recovery in the German stock market is over again. After US central bank chairman Jerome Powell announced a sharp rise in interest rates by 50 basis points in early May yesterday, the domestic stock market fell sharply. The DAX was pulled into weak Wall Street, but prices also fell in Asia.

The leading German index eventually lost 2.48 percent to 14,142 points. Yesterday, the DAX surpassed the limit of 14,500 points and gained almost one percent. In a weekly comparison, this results in an almost balanced balance. On Maundy Thursday, the index closed at 14,164 points.

“Market turmoil continues, triggered by further comments from US Central Bank Chairman Jerome Powell,” wrote ING Bank experts. “Stocks and bonds are being sold at the same time,” said portfolio manager Thomas Altmann of investment adviser at QC Partners. “Everything that has any interest rate risk flies from the depot.”

“Last Light” Covestro

Among DAX shares, Covestro was clearly at the end of the index, but this was mainly due to a dividend deduction of EUR 3.40. “Netto” continued to sell, as did former Corona Delivery Hero winners and online fashion retailer Zalando. Siemens Healthineers also fell more sharply.

On the other hand, HeidelbergCement managed to score points, the shares were at the top of the DAX with an increase of around three percent at times. They ended up gaining 0.8 percent. According to securities dealers, the newspaper benefited from a good mood in the construction industry after the Holcim cement plant raised its sales outlook. Holcim’s shares also rose significantly on the Swiss stock exchange.

The reporting season is gaining momentum

In the coming week, the “stock market bulls” must now hope for the positive effects of the current reporting season. Only eleven DAX companies present results. Given the uncertain economic environment, investors will pay special attention to companies’ forecasts.

A completely different type of political upheaval could shake the financial markets as early as Sunday – if right-wing populist Marine Le Pen were elected president of France. Acting Emmanuel Macron is leading the polls. “Given that left-wing voters will find difficult elections, it is not advisable to underestimate the potential for surprises,” writes Ulf Krauss of Helaba.

the euro is weakening

The euro came under pressure on Friday after initially modest gains. The common currency is in a bad mood in the financial markets and was last quoted at $ 1.0799 when trading in the US. European central bank…