NEW YORK (dpa-AFX) – The most important US stock indices were able to contain their high initial losses on Thursday. However, the fear of even more sharply rising interest rates with negative effects on economic development and the attractiveness of shares remained. The surprisingly high rate of inflation in the world’s largest economy, which was published mid-week, is currently fueling fears of even more aggressive interest rate hikes by the US Federal Reserve. The picture has now been underpinned by unexpectedly high producer prices, which are likely to increase the pressure on the Fed. Investors fear that aggressive central bank policy will push the economy into recession.
The Dow Jones Industrial (Dow Jones 30 Industrial) recently fell by 0.96 percent to 30,476.49 points. At the beginning he had dropped to 30,143.93 points. The market-wide S&P 500 recently dropped 0.85 percent to 3769.44 points. The tech-heavy NASDAQ 100 was down 0.21 percent to 11,703.99 points.
“The frightening part of yesterday’s inflation report is that, according to many economists, even the more than nine percent inflation could not yet represent the high point,” wrote market analyst Jochen Stanzl from the trading house CMC Markets.
Other economic data of the day were also sobering: initial jobless claims rose surprisingly last week, even if the situation on the labor market remains fundamentally positive.
Against this background, Bank of America lowered its year-end target for the S&P 500 from 4500 to 3600 points. According to their own statements, the analysts are therefore the most pessimistic of all experts. In the bank’s opinion, the US is likely to slip into a mild recession in the second half of the year.
Lutz Wockel, head of equity fund management at Warburg Invest AG, added that the start of the company reporting season for the second quarter entailed additional risks for investors. As usual, this started with the big banks. JPMorgan (JPMorgan ChaseCo) and Morgan Stanley started things off. In view of the gloomier economic prospects, the largest US bank announced a further and also surprisingly significant drop in profits in a year-on-year comparison. Among other things, earnings in the investment banking (IB) business disappointed. The multi-billion buyback of own shares is therefore now suspended for the time being. Shares fell more than four percent at the end of the Dow.
Morgan Stanley shares lost a good one percent. JPMorgan’s competitor also disappointed with its IB business and reported falling profits in the second quarter.
An analyst opinion from Credit Suisse weighed heavily on the shares of the fertilizer manufacturer Nutrien (Nutrien (Ex Potash Agrium)). The papers buckled by almost five percent. Expert John Roberts expects the profitability of the agricultural segment and the profitability of fertilizers to be near peak levels. The pundit believes Nutrien’s stock valuation will remain low until the cycle bottoms./he