July 2, 2022

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Stocks fall after the European Central Bank laid out a plan to raise prices

Stocks fall after the European Central Bank laid out a plan to raise prices

US stock indices fluctuated as investors digested the European Central Bank’s plan to start raising interest rates next month.

The S&P 500 fell 0.6% in early trading Thursday and the Dow Jones Industrial Average fell 0.5%. The technology-focused Nasdaq Composite was also down 0.5%. Earlier, the major indicators opened lower before turning briefly to positive.

For most of this year, investors have been putting together their portfolios to account for End of easy payment terms In the US but for now, traders should consider the tighter policy in the Eurozone as well.

The European Central Bank said on Thursday that it will Increasing the main interest rate From 0.5% to zero or higher by September, and maybe thereafter. The central bank indicated that it plans to start with a quarter percentage point increase in July. It also said it would end its large-scale bond-buying program on July 1.

In both the US and Europe, the announcement sent stocks lower. The pan-continental Stoxx Europe 600 lost about 1%. The euro advanced against the dollar, up 0.3%, reversing its earlier losses. Government bonds in Germany and the US fell, driving up yields.

The moves of central banks in the United States and Europe are coming in the form of inflation around the world Still weighing on families. On Friday, investors will get a fresh picture of US inflation when the CPI data for May is released. Economists polled by the Wall Street Journal expect the reading to show that US inflation stabilized at 8.3% in May, the same as the annual rate recorded for April.

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Traders and strategists say the inflation data could have a huge impact on the next run in the markets, and help shape the Federal Reserve’s interest rate decisions later this year. The Fed meeting will be held in June next week, and the central bank is widely expected To raise the main interest rate by half a percentage point — a move expected to be repeated in July.

“The concern here in the US is the Fed’s tightening in an economy that is already showing signs of slowing,” said Leo Grohosky, chief investment officer at BNY Mellon Wealth Management. “The European Central Bank is narrowing in a more pronounced slowdown; it could affect global growth, which in turn could be another headwind for the company’s earnings.”

Much of the debate in the markets has shifted to what the Federal Reserve might do At its meeting in September. Until a clearer picture emerged, some traders were unwilling to make big bets in the market, investors and strategists say.

Some strategists say this has led to more choppy trading in recent sessions as they try to determine if this year’s market sell-off has bottomed, or if there is more pain ahead. Many are also considering the possibility of an eventual US recession.

“People have no conviction one way or the other and they are taking the chips off the table,” said Viraj Patel, global macro strategist at Vanda Research. “They don’t want to run into an intruder either way.”

Treasury Secretary Janet Yellen faced questions from the Senate Finance Committee on Tuesday about the high rate of inflation in the United States and whether the Covid-19 rescue package played a role. Photo: Nicholas Kamm/AFP/Getty Images

In trading in New York, shares

Tesla

Added 5% after

UBS

The stock lifted to buy from neutral, putting the electric car maker on track to extend its rally for a fourth day. Tesla shares have taken a hit this year, down 31% through Wednesday, as investors dumped shares of growth companies. stock have I was also touched by CEO

Elon Muskplan to buy

Twitter.

Stocks traded in the United States

Alibaba Holding Group

It lost 3.7% after China’s securities regulator denied a report that it was working to revive Ant Group’s initial public offering.

shares

five below

It fell 3.6% after the discount retailer reported a drop in first-quarter profit as operating costs rose.

In the treasury market, the return is on Treasury standard for 10 years It advanced to 3.043%, from 3.028% Wednesday. Yields and bond prices move inversely.

In energy markets, Brent crude, the international benchmark for oil prices, rose 0.03% to $123.62 a barrel, after hitting a two-day high on Wednesday. Oil prices have risen recently as China emerges from its Covid-19 lockdowns and as traders continue to assess Possible supply disruptions Because of the war in Ukraine.

A trader worked on the floor of the New York Stock Exchange on Wednesday.


picture:

Alyssa Ringler/The Associated Press

In Asia, China’s Shanghai Composite Index lost 0.8%, despite data showing that the country’s exports rebounded strongly in May. Hong Kong’s Hang Seng lost 0.7%, while Japan’s Nikkei 225 closed almost unchanged.

Write to Caitlin McCabe at [email protected]

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