Wall Street opens lower, more marked by Ukraine than by the Fed

New York (AFP) – The New York Stock Exchange opened lower on Thursday, taking a breather after two sessions of gains and again concerned about renewed tension between the United States and Russia over Ukraine, more than the rise US central bank rates (Federal Reserve, Fed) the previous day.

Around 1:45 p.m. GMT, the Dow Jones yielded 0.26%, the Nasdaq index, with a technological tone, dropped 0.43%, and the broader S&P 500 index lost 0.25%.

“The market is trending lower, but I don’t think that has anything to do with the Fed,” which raised its key rates on Wednesday, said Peter Cardillo of Spartan Capital.

“I think it’s more to do with the statements between Biden and Putin, and of course, the war,” he explained.

US President Joe Biden has called his Russian counterpart a “war criminal”, comments that the Kremlin has deemed “unacceptable and unforgivable”.

After the bombardment by the Russian air force on Wednesday of a theater in Mariupol in which more than a thousand civilians had taken refuge, Ukrainian President Volodymyr Zelensky estimated that “Russia (had) become a terrorist state” .

“Investors appear to have lost optimism about a near-term resolution to the dispute,” Schwab analysts wrote in a note, “but further talks are expected today” (Thursday).

This further deterioration in the geopolitical climate and the rebound in oil prices above 100 dollars “give investors the opportunity to take profits”, according to Peter Cardillo.

Wall Street has taken the first rate hike from the Fed since 2018 well, but also the resolute tone of its members, who foresee seven successive rate hikes in 2022.

“The market wants clarity,” said Peter Cardillo to justify the positive reaction of investors to an announcement which is rather likely to tense the stock market, in theory. “Now we have it, we know what to expect.”

“Of course,” he continued, “there remains the question of whether this position will start to bring inflation down.”

The yield curve, which runs from short to long maturities, flattened considerably after the Fed’s announcement on Wednesday. This reflects fears for medium-term economic growth, and even a possible recession following a cycle of interest rate hikes.

“When inflation is too high, it is a good strategy for the Fed to announce more hikes than the market expects to keep things under control,” Chris Low said in a note. of FHN Financial. “They can always slow down later,” he added.

The VIX index, which measures market volatility, has fallen to a busier level since mid-February, before the start of the war in Ukraine.

Oil companies benefited from the rebound in oil prices. Occidental Petroleum (+7.38%) and Marathon Oil (+3.91%) were thus at the party, as was the gas company Cheniere Energy (+3.93%).

Conversely, after several successful sessions thanks to the acceleration of tourism after two sluggish years, the airlines were catching their breath. Delta Air Lines (-1.39%), American Airlines (-0.94%) or United Airlines (-1.04%) were all in the red.

Ralph Lauren benefited (+ 2.24% to 116.56 dollars) from a note from JPMorgan which predicts that the clothing brand will be among the winners of the gradual return of employees to the office, at the end of the pandemic.

The New York market reacted little to two healthy macroeconomic indicators, namely new jobless claims (214,000), the lowest level since the start of the year, and the manufacturing activity index in the region. Philadelphia, much better than expected (27.4 points against 14 expected).