Wall Street closed lower on Wednesday, after minutes from the last meeting of the Federal Reserve’s Open Market Committee (FOMC) raised expectations that the central bank will move faster to raise interest rates to combat the inflation. During the session, the sector with the worst performance was technology.
The NASDAQ Composite Index, made up of technology companies, fell 3.34%, its worst intraday decline since February last year. The S&P 500 lost 1.9%, its biggest drop since September, while the Dow Jones industrial average fell 1.07 percent.
“Stocks that have high multiples (the price of shares compared to earnings) are generally affected when it looks like the Fed is about to raise rates,” explained the chief investment officer at management company Bokeh Capital Partners. .
This is the case of many stocks, especially technology, which posted considerable gains in 2021 such as Alphabet which fell 4.59%, Tesla lost 5.35% and Apple 2.66%, this Wednesday.
In the first three days of the year, companies such as Tesla (-9.31), Microsoft (-5.49), Netflix (-5.0%), Alphabet (-4.98%) and Meta Platforms (-4.24%) remained in the red.
Other firms with negative performance on Wednesday were Bed Bath & Beyond, which fell 10.84%; Mercado Libre 9% and Modern 7.65%, as well as Nvidia 5.76 percent. Some unusual stocks held out and allowed the Dow to limit its losses, particularly medical stocks like Merck (+ 2.43%) or Walgreens (+ 0.97%).
Another star who skyrocketed its Initial Public Offering (IPO) in 2021, electric vehicle maker Rivian (-11.22%) took the brunt after a series of announcements from its competitors.
General Motors (-4.56%) unveiled an electric version of its own flagship truck, the Silverado, at CES, the Las Vegas tech show, on Wednesday.
The turning point was the release of the Fed’s FOMC December meeting minutes, showing the desire to tackle rising inflation earlier and more frequently than expected.
“The market did not like this step,” Briefing.com analysts commented in a note.
First it was the debt market that rebounded, with the benchmark 10-year Treasury rate climbing above 1.70% to a nine-month high.
Various factors
Banco Base highlighted in an analysis that there were three factors that dragged the US indices to negative territory during yesterday’s session. High inflation, which is expected to remain high for a few months due to supply problems, which could result in a rise in interest rates earlier than expected, stood out in the Fed minutes.
Another was that technology issuers continued to decline, given the increase in interest rates, since an increase in the interest rate reduces the valuations of companies.
Finally, the increase in the perception of risk in the Asian session, after Hong Kong banned flights from eight countries: Australia, Canada, France, India, Pakistan, the Philippines, the United Kingdom and the United States. Likewise, the Hong Kong government imposed new restrictions to curb infections, including the closure of restaurants, bars and gyms after 6:00 in the afternoon and the cancellation of mass events.
Another factor in the fall of the US Stock Market is due to the increase in fear of further infections due to the Omicron variant of Covid-19.
In Mexico, the S & P / BMV, the main index of the Mexican Stock Exchange, fell after the publication of the Fed’s minutes, but managed to close with a rise of just 0.01% to 53,024.15 points. During the week, it is down 0.47 percent.
The FTSE BIVA index, of the Institutional Stock Exchange (Biva), ended with a negative movement of 0.05% with 1,095.77 units.
Of the 35 companies in the S & P / BMV IPC, 20 closed lower with Grupo Carso leading (-4.02%), followed by Alfa (-3.29%) and Grupo Bimbo (-3.05%).
High inflation was highlighted in the minutes, which is expected to remain high for some months due to supply problems, which could result in a rate hike earlier than expected.
Reference-www.eleconomista.com.mx