wall street crashes

The New York Stock Exchange ended sharply lower on Monday, on fears that inflation will push the US central bank (Fed) to further tighten the screw as an economic slowdown or even a recession looms on the horizon.

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The Dow Jones lost 2.79% to 30,517.06 points, the tech-influenced Nasdaq index fell 4.68% to 10,809.22 points, while the broader S&P 500 index fell 3.87% to 3,749. .91 points.

The S&P 500, considered the most representative index of Wall Street, has entered a “bear market”, which means that it has lost more than 20% since its all-time high in early January (-22% at the close of Monday) .

Already battered on Friday, the New York market rattled further on Monday, still worried about the CPI price index, which showed that inflation had picked up again in May in the United States, while many expected the start of a slowdown. .

“Friday was probably a pivotal moment for the markets,” commented Angelo Kourkafas of Edward Jones. “The central thesis (of investors) has been invalidated”, showing that inflation had not yet peaked.

Consequently, traders have revised their monetary policy projections and now estimate that there is almost an 80% chance that the Federal Reserve will raise its rates by at least 1.75 percentage points by the end of September, that is, two half point and another of 0.75 point.

Such a steep increase would be the first since 1994.

“We expect the Fed to surprise markets by raising rates by 0.75 percentage point as early as June to bolster its credibility and regain control over inflationary pressures,” the analysts wrote in a Barclays note, regarding the Fed meeting. Fed which will take place on Tuesday and Wednesday.

This revision of expectations “contributed not only to the volatility of bonds, but also to that of equities”, explained Angelo Kourkafas.

“The fact that there are headwinds building (for the economy) as the Fed is forced to raise rates at a faster pace has caused indigestion in the markets,” he said.

“Wall Street faces a plethora of bad news,” commented Edward Moya of Oanda, “but the problem is that until we see a deterioration in credit conditions and market performance, the Fed has the green light to tighten as much as possible. possible and reduce inflation. control”.

Investors generally show “lack of confidence in valuations, knowing earnings warnings remain slim despite expectations of much slower growth or even recession in the coming months,” according to Edward Moya.

Listen to Alexandre Moranville-Ouellet at the microphone of Mario Dumont on QUB radio:

The prospect of a rise in interest rates also rattled the bond market, which suffered a massive disconnect. The yield on 10-year US government bonds, which move in the opposite direction of their price, soared to 3.38% for the first time in more than 11 years.

The yield curve, which links all bond maturities between short and long rates, dislocated on Monday, with the 2-year US Treasury yield even briefly passing above the 10-year mark. , a signal that is sometimes interpreted as before. recession.

For Angelo Kourkafas, the New York market shows no signs of capitulation, a term used to indicate that the selling trend is no longer opposed and that the market is approaching a bottom.

Many believe that the VIX index, which measures market volatility, despite jumping almost 25% on Monday, is still a good distance from historically bottomed levels.

In the stock market, very few escaped the wave that swept away everything in its path, with a particular ferocity for technology, cryptocurrencies in particular, and the travel industry.

Among the most affected, Amazon (-5.45%), Tesla (-7.10%) and Meta (-6.44%). Since its all-time high in early September 2021, the social network has lost 57% of its market capitalization.

In a climate of general risk aversion, everything directly or indirectly related to cryptocurrencies was shunned like the plague, as evidenced by the performance of the Coinbase platform (-11.41%) or the specialist in “mining” (creation of bitcoins ) Riot Blockchain (-10.06%).

As the summer season approaches, cruise passengers have suffered from fears of an economic slowdown, such as Norwegian (-12.23%) or Royal Caribbean (-9.74%). In its wake, airlines flew very low, from American Airlines (-9.45%) to United Airlines (-10.06%).