Wall Street US investors cautious ahead of Fed decision

Wall Street US investors cautious ahead of Fed decision

Wall Street US investors cautious ahead of Fed decision
Investors expect the Fed to raise rates soon.  Source: Reuters

In anticipation of the Fed’s decision on monetary policy, investors only touch US stocks with the tips of their fingers. The leading indices Dow Jones, Nasdaq and S&P 500 crumbled at the opening on Wednesday by almost half a percent.

“It is widely expected that the US Federal Reserve will announce an increased pace of curbing its asset purchases,” said analyst Ricardo Evangelista of brokerage firm ActivTrades. This will fuel speculation that a first rate hike will come earlier than previously thought.

The interest rate forecasts of the Fed management team are also important, interjected David Riley, chief investment strategist at asset manager BlueBay. Investors would check the so-called “dot plots” for possible more aggressive interest rate hikes in 2023. Experts expect at least two steps of a quarter of a percentage point each in 2022.

Even before the decision is made, there is an unhealthy development on the US stock exchanges. A handful of highly capitalized and correspondingly highly weighted stocks hold indices like the S&P 500 close to record highs, while many speculative stocks are in a correction or even a bear market because they have already slipped more than 20 percent.

According to Tobias Krieg from Lynx Broker, the US market is now completely dependent on a small number of heavyweights. “The five largest companies in the S&P 500 represent 26 percent of the market capitalization, the ten largest for 34 percent,” he has calculated. If the few heavyweights that hold the market together should tip over, things could get uncomfortable. This means stocks like Apple, Microsoft, Amazon and the Google parent company Alphabet.

The more speculative values ​​have already slipped significantly. Netflix, for example, has lost around 15 percent since its record high in mid-November. The hyped chip manufacturer Nvidia fell into a bear market for a short time with a minus of more than 20 percent. Tesla is 23 percent below the record high set in early November.

One of the favorites on Wall Street was Eli Lilly with a price increase of 4.6 percent. Thanks in part to a government contract to supply corona drugs, the pharmaceutical company raised its profit target for 2021. For 2022, the company was forecasting a surprisingly high surplus of $ 8.50 to $ 8.65 per share.

Look at further individual values

Encouraging test results for a coronavirus drug encourage investors to get started. The drug company’s shares rise nearly 11 percent on Wall Street. The preliminary data indicated that the drug could neutralize the Omikron variant and, unlike competing products, would not lose any of its effectiveness in the fight against this mutant, says analyst Phil Nadeau of asset manager Cowen.

The shares fell 0.7 percent. The British bank Barclays had downgraded the share from “equally weighted” to “underweighted”. Solid fundamentals and stronger headwinds for competitions would have helped Domino’s outperform during the pandemic. For the analysts, however, this headwind for the competition is now easing.

The major Swiss bank UBS rated the delivery service’s share as a “top pick”. UPS is likely to benefit from rising consumer spending and has greater opportunities to expand margins than its competitors. UPS shares rose 0.7 percent.

The shares of the amusement park operator rose by 1.7 percent. The US bank Goldman Sachs had upgraded the share from “neutral” to “buy”, highlighting the robust ticket prices and the conservative forecast by Six Flags.