Wall Street ended September with significant losses on Friday. The Fed could thus have to raise key interest rates again in the fight against high inflation.
Wall Street ended a very weak stock market month with significant losses on Friday. The markets were only briefly supported by warning words from the deputy head of the US Federal Reserve regarding monetary policy in the USA. In the end, the realization that the upward trend in prices has recently picked up again prevailed. This means that the pressure on the Fed to continue raising interest rates in the fight against high inflation remains high.
The leading index Dow Jones Industrial fell by 1.71 percent to 28,725.51 points. In the meantime it had dropped to its lowest level since November 2020. On a weekly basis, this means a minus of 2.92 percent.
The Dow ended September down 8.8 percent. The last time there was a major monthly loss was in March 2020 and thus at the height of the Corona crisis. Nevertheless, the balance sheet for the third quarter is less negative than in the previous quarter with a minus of 6.7 percent. However, the stock market barometer recorded the third quarterly loss in a row – this was last in 2015.
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For some time now, the Fed has been fighting high inflation with strong interest rate hikes and has signaled further strong interest rate hikes. The deputy head of the central bank, Lael Brainard, said that one must observe the effects of rising borrowing costs on the stability of the world markets. However, investors only reacted with relief for a short time.
Recent inflation data ultimately weighed more heavily. The PCE price index, which is based on consumer spending, rose more-than-expected yoy and month-on-month in August. The Fed prefers this price indicator over the better-known consumer price index, the CPI. It is aiming for an inflation rate of two percent.
On the company side, Nike shares fell by almost 13 percent after the presentation of business figures and a clouded outlook. The share certificates of the sporting goods manufacturer were the clear tail light in the Dow. Although industry insiders spoke of a solid first business quarter, they were bothered by the unexpectedly weak margins.
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Rent-A-Center shares fell 22 percent. The rental company for electrical items and furniture had missed expectations with its forecast.
The euro halted its recent recovery, last trading at $0.9807. The European Central Bank had set the reference rate at 0.9748 (Thursday: 0.9706) dollars. The dollar thus cost 1.0258 (1.0302) euros.
In the US bond market, recent price increases drove yields. Trend-setting papers with a term of ten years recently yielded 3.82 percent. In contrast, the futures contract for ten-year Treasuries (T-Note Future) fell by 0.53 percent to 111.86 points.
