by Caroline Valetkevitch

NEW YORK, Reuters the US Federal Reserve (Fed) in its interest rate hike campaign.

The Dow Jones index fell 1.08%, or 367.17 points, to 33,684.53 points.

The broader S&P-500 lost 48.29 points, or 1.16%, to 4,119.58 points.

The Nasdaq Composite fell for its part by 132.09 points (1.08%) to 12,080.51 points.

The Fed is expected to announce on Wednesday, at the end of its two-day monetary policy meeting, a 25 basis point hike in interest rates to 5%-5.25%.

Investors are also waiting for clues from the US central bank on its monetary tightening campaign, with the possibility that it suggests that this hike will be the last – at least, in the short term.

According to Thomas Hayes, president of Great Hill Capital, the “message sent today by the market is that the Fed must (promise) a pause, or if not we will continue to see turmoil in the banking system”.

In the wake of the bankruptcy of First Republic Bank, most of whose assets were acquired by JPMorgan Chase as part of a deal closed on Monday, the securities of American regional banks continued to fall.

PacWest Bancorp tumbled 27.8%, while Western Alliance Bank and Comerica lost 15.1% and 12.4% respectively.

Adding to concerns, US Treasury Secretary Janet Yellen has said the federal government may be unable to meet all of its financial obligations by June 1 if no action is passed by Congress to raise the cap. US debt.

The hypothesis of a default on the debt of the United States caused a drop in oil prices, dragging down energy which recorded, with -4.3%, the largest drop among the major sectors of the world. S&P-500, just ahead of financials, down 2.3%.

While fears of a recession and the situation in the banking sector are fueling the idea of ​​an interest rate cut in the second half of the year, inflation remains well above the Fed’s 2% target while the market employment still shows its resilience – elements that argue against an easing of monetary policy.

Noting these “mixed signals”, Alan Lewis, chief investment officer of DiversyFund, said that “the Fed will continue to raise rates until something breaks in the economy (…)”.

Halfway through the earnings season, analysts expect S&P-500 companies to report quarterly revenue down 1.4% year-on-year from an initial forecast of -5, 1%, according to Refinitiv data, while the better than expected results of technological giants, in particular, reassured.

( Jean Terzian)

Copyright © 2023 Thomson Reuters