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15.11.2024 07:42 AM
US stock indices ended the trading session in negative territory on Thursday, driven by statements from Federal Reserve Chairman Jerome Powell, who made it clear that interest rates are not expected to be cut anytime soon. According to him, the current economic situation allows the Fed to act in a balanced manner, without rushing to ease monetary policy.
Speaking at an event in Dallas, Powell emphasized that the US economy continues to show growth, the employment level remains stable, and inflation still exceeds the target of 2%. This means that it is important for the regulator to exercise caution before taking steps to ease policy.
Against the backdrop of these statements, investor expectations have changed significantly. Despite the fact that some traders are still betting on a 25 basis point rate cut in December, the probability of such a scenario has dropped to 62%. The day before, it was 76%, and on Wednesday it reached 82.5%, according to data from the CME FedWatch tool.
The main Wall Street indices ended the day in the red zone. The Dow Jones Industrial Average (.DJI) lost 207.33 points, or 0.47%, to end at 43,750.86. The broader S&P 500 (.SPX) fell 36.21 points, or 0.60%, to end at 5,949.17. The tech-heavy Nasdaq Composite (.IXIC) fell 123.07 points, or 0.64%, to end at 19,107.65.
Powell's comments came shortly after the release of producer price data. The October producer price index for final demand rose 0.2% from the previous month, in line with analysts' expectations. However, the 2.4% annual increase was slightly higher than expected, adding to the Fed's cautious stance.
Thursday's trading session showed that investor expectations do not always match reality. Powell's statements reminded the market that policy easing takes time, and the resilience of the economy is the regulator's main goal.
For the week ending November 9, the number of jobless claims in the United States decreased by 4,000 to 217,000, taking into account seasonal adjustments. This figure was lower than analysts' forecasts, which indicates continued stability in the labor market.
"More and more data confirms that inflation remains above the 2% target," said Melissa Brown, managing director of research projects at SimCorp in New York.
The expert also emphasized that although the new data generally coincided with expectations, investors often pause to analyze the situation in more detail: "Sometimes they ask, 'What does this really mean?' That adds to the uncertainty about how the Fed will respond after its December meeting."
After the election, the market shifted its focus to potential inflationary pressures that could arise from policy changes. Anticipated measures, such as the tariff hikes promised by President-elect Donald Trump's new administration, have already begun to weigh on sentiment.
Some Federal Reserve officials are again focusing on inflation risks, weighing when and how much to cut rates to avoid a backlash.
Richmond Fed President Tom Barkin sounded a cautious note, pointing to rising wages from union agreements and the risk of more tariffs. He said that could cause policymakers to reconsider their confidence that inflation is under control.
Of the 11 major sectors in the S&P 500, industrials were the biggest losers. The industrials subsector (.SPLRCI) fell 1.7% on the day, with the biggest drop coming from defense stocks, which had previously posted strong gains in the immediate aftermath of the election.
A decline in jobless claims shows labor market stability, but uncertainty over inflation and policy action continues to weigh on markets. Market participants are waiting for more Fed decisions that could determine the direction of the economy in the coming months.
Share of defense major RTX Corp (RTX.N) ended Thursday down 3.9%, hitting its lowest since Sept. 19. General Dynamics (GD.N) also posted a big drop, falling 6.9% to hit its lowest since Oct. 31.
The Dow was able to partially offset losses thanks to a 6% gain in Walt Disney (DIS.N). The entertainment giant beat Wall Street's quarterly profit expectations and provided a positive outlook for the coming years, which strengthened the company's position in the market.
The consumer discretionary sector (.SPLRCD) was the second-worst loser among all S&P 500 sectors, losing 1.5%. The main pressure in the sector was on electric vehicle makers.
Tesla (TSLA.O) shares fell 5.8%, while Rivian Automotive (RIVN.O) fell a whopping 14.3% after analysts said a $7,500 tax credit for electric vehicle buyers could be scrapped as part of the new Trump administration's planned tax reform.
Amid the general decline, some companies showed sharp gains. Tapestry (TPR.N), the parent company of the Coach brand, jumped 12.8% to its highest since July 2013 after the company said it was terminating its $8.5 billion deal with Capri Holdings (CPRI.N) following a U.S. court ruling.
Capri, meanwhile, also showed a rise of 4.4% despite the deal's cancellation.
Thursday's trading saw strong swings across sectors. Defense and electric vehicle makers faced pressure, while Disney and Tapestry emerged as growth hotspots. Investors continue to watch political and economic developments closely, as they could dramatically impact market trends.
On the New York Stock Exchange (NYSE), the number of stocks that ended the day lower significantly outnumbered those that advanced, a ratio of 1.8 to 1. However, there were 177 new highs and 90 new lows over the past 52 weeks, highlighting the mixed picture.
On the Nasdaq, 1,362 stocks rose, while 2,912 declined. The ratio of declines to gains was 2.14 to 1, indicating a clear dominance of negative sentiment. The S&P 500 has posted 26 new highs and 12 new lows for the year, while the Nasdaq Composite has posted 81 new highs and 190 new lows.
Total trading volume on U.S. exchanges reached 15.34 billion shares, well above the average of 13.68 billion over the past 20 sessions. Such activity indicates strong investor interest despite market volatility.
The third-quarter earnings report revealed the strategic moves of hedge funds. The focus was on the financial sector, Tesla, and a private prison operator. These investments, known as "Trump Deals," demonstrated high sensitivity to political events.
Before the election, stocks linked to Donald Trump's political agenda were subject to significant fluctuations. However, after his victory, these assets began to show steady growth, meeting investor expectations.
The US market continues to adapt to political changes and macroeconomic data. The increase in activity amid a significant number of stocks falling underscores the uncertainty dominating the market participants. Meanwhile, strategic investments in "Trump deals" confirm that politics remains a powerful driver for certain sectors of the economy.
Bridgewater Associates, Coatue Management and D1 Capital Partners were among the hedge funds that increased their investments in bank stocks after the US election. Donald Trump's victory has increased expectations for easing regulation in the financial industry, which has become a catalyst for growth in the banking sector, according to documents published on Thursday.
Bridgewater Associates, founded by Ray Dalio, ended September with strengthened positions in financial giants Goldman Sachs (GS.N), Morgan Stanley (MS.N), Wells Fargo (WFC.N), Bank of New York Mellon (BK.N) and Citigroup (C.N). The fund's latest move is to create a position in Bank of America (BAC.N).
Bridgewater's biggest bet is on Wells Fargo, whose stake in the portfolio was valued at $79.6 million at the end of September.
The KBW index, which measures the health of the banking sector, has risen about 17% since the end of September and has gained about 12% since the Nov. 5 election. These figures underscore the market's positive expectations associated with the policy change.
It's important to note that the fund's position data is based on 13-F reports, which cover the portfolio as of September 30. These reports are a rare tool for analyzing the holdings of hedge funds, which generally prefer to keep their strategies secret. However, they do not reflect changes that may have occurred after that date.
D1 Capital Partners, led by Dan Sundheim, also stood out with its large investments in the banking sector. As of September 30, the fund acquired its first stake in Bank of America, worth $174.9 million, according to the report.
The US elections not only affected the country's political course, but also became an important factor for the market. The banking sector, supported by expectations of easing regulations, became a tasty morsel for large players such as Bridgewater and D1 Capital. However, questions remain about whether they will hold up post-election, highlighting the importance of monitoring these strategies further.
Coatue Management has rebalanced its strategy, cutting its large stakes in Meta Platforms (banned in Russia) and Nvidia (NVDA.O). However, the fund has stepped up its investment portfolio with new acquisitions, including 2.7 million shares of KKR (KKR.N) worth $355 million and 195,969 shares of Blackstone (BX.N) worth about $30 million.
KKR and Blackstone, the leading players in private equity fund management, could benefit from a rebound in deal activity. The steady growth of these companies has attracted the attention of major hedge funds such as Coatue Management.
Some hedge funds continue to invest heavily in Tesla (TSLA.O) due to Elon Musk's close ties to the Trump administration. The stock has posted an impressive gain of more than 28% since November 5. Musk is seen as a key figure in pushing government initiatives aimed at improving technological efficiency.
Nissan Motor (7201.T) shares rose 6% in Tokyo morning trading on Friday after a report in Diamond Online reported that activist investor Oasis Management had acquired a stake in the company.
Nissan shares also rose earlier this week after it was reported that an entity linked to Effissimo Capital Management had acquired a stake in the automaker. The activist moves are fueling speculation about potential changes to the company's corporate structure and strategy.
The shift in focus of large funds such as Coatue Management to investment giants, as well as active positions in Tesla and Nissan, highlight the changes in the market. Investors are adapting to political and economic changes by betting on promising sectors and companies.
Hedge funds continue to increase their investments in electric car maker Tesla. Third Point opened a new position, buying 400,000 shares of the company, and Viking Global acquired 436,272 shares. Coatue Management, in turn, increased its stake in Tesla by 36.4%, bringing the total number of shares to 2.2 million. At the end of September, these investments were valued at $584.5 million.
Discovery Capital Management, known for its macroeconomic strategies, opened a new position in Geo Group Inc (GEO.N), buying 387.1 million shares. Geo Group operates private prisons and detention centers, making it particularly attractive amid political changes in the United States.
Shares in the post-election period have soared more than 84%. The gains were fueled by Donald Trump's promise to crack down on illegal immigration, which could increase demand for detention centers. These expectations have been key to attracting interest from major investors.
The hedge funds' decisions reflect their confidence in the growth prospects of companies linked to politics and high technology. The increase in Tesla underscores their belief in the success of the electric vehicle revolution, while the choice of Geo Group demonstrates their attention to companies at the intersection of business and politics.
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