Wall Street drops at open after US inflation

The New York Stock Exchange fell at the opening on Thursday after US inflation accelerated more than expected in January.

Around 3:00 p.m. GMT, the Dow Jones index lost 0.28%, the Nasdaq dropped 0.69% and the broader S&P 500 index fell by 0.50%. Earlier, just after the open, the indices had lost more before regaining some ground.

The day before, the Dow Jones rose 0.86%, the tech-heavy Nasdaq index gained 2.08%, and the broader S&P 500 index climbed 1.45%.

Inflation continued to accelerate in January in the United States to reach 7.5% over one year (+0.6% over the month), its fastest pace for nearly 40 years and more than expected , announced the US Administration on Thursday.

We have to go back to February 1982 to find such high annual inflation, according to the consumer price index (CPI) published Thursday by the Labor Department. Over one year, energy prices have increased by 27%, and food prices have risen by 7%.

Faced with this rise in prices and fears that the American Central Bank (Fed) will not be more strict in its monetary policy in order to curb inflation, bond yields on 10-year Treasury bills briefly crossed the bar on Thursday. 2%.

10-year yields climbed to 2.001% shortly before Wall Street opened, their highest since July 2019, before falling back to around 1.98% around 3:00 p.m. GMT.

“The inflation numbers came out stronger than expected and that’s negative for the market,” said Peter Cardillo of Spartan Capital.

“Ten-year rates have touched 2%, the dollar is very strong. This means the Fed could be more aggressive and if it has any signs of wages rising further when the next jobs report comes on March 4, it will could raise rates by half a percentage point (0.50%) at once,” the analyst said.

The greenback climbed 0.18% against the euro to 1.1405 dollars for one euro.

On the front of business results, several good news were hailed on the side.

The American entertainment giant Disney saw its turnover increase by 34% year on year, to 21.8 billion dollars in the first quarter of its financial year. Profit was $1.1 billion.

Its online video service, Disney+, gained 11.7 million subscribers in one quarter, reaching 129.8 million, significantly more than the 124.6 million anticipated. The stock rose 5.27% to $154.99.

Uber’s stock was also sought after (+4.33% to 41.93 dollars) after the group announced that it had posted a net profit of 892 million dollars in the fourth quarter, a sign that profitability is no longer a chimera for the car rental giant with drivers (VTC).

The US company posted $5.8 billion in holiday season revenue, up 83% year-on-year.

Twitter, which announced its quarterly results before the opening of Wall Street, saw its number of users increase in the fourth quarter of 2021, but its turnover came out below Wall Street expectations. Its board of directors has also approved a new share buyback program for $4 billion. The title fell 1.13% to 37.41 dollars.

Coca-Cola (+1.43%) and PepsiCo (-0.52%) saw their sales of non-alcoholic drinks and snacks increase further at the end of 2021, supported by the increase in their prices, but warned that inflation, in transport or raw materials, weighed on their performance.

Coca-Cola saw its revenue grow 10% in the fourth quarter of 2021, to $9.5 billion, and 17% for the full year, to $38.7 billion,

PepsiCo, for its part, saw its turnover increase by 12%, to 25 billion dollars, in the fourth quarter of 2021, but its net profit fell by 28%, to 1.3 billion dollars.

Among the eleven sectors of the S&P, only three were in the green, those which benefit from inflation and the rise in rates such as energy (+1.13%), materials (+0.53%) and banks (+0.34%).

The information technology sector (-1.49%) was the worst performer, according to the repeated scenario that so-called growth stocks suffer from a potential increase in the cost of money, while these groups must borrow to grow and deliver the promised profits, on which their stock market valuation is based.