Wall Street He returned from Christmas with good intentions, trying to escape from the grip of the bear market after the destruction of the previous four days. The Dow Jones, the reference index of the parquet New York, managed to rebound 1% at the beginning of the session and claimed 22,000 points. Little by little it was picking up pace, even above 2%, although it remains to be seen if the comeback is insufficient to compensate for the collapse of almost 3% that it suffered on Monday, in the worst Christmas eve that you remember. In Europe the stock exchanges remained closed this Wednesday, still for the Christmas festivities.
The trading volume is very low this week, because the Christmas bridge will be linked to the New Year's. Any sudden movement by the big players in the market, therefore, causes the indexes to go in any direction. This Wednesday was about seeing if the most influential investors were going to try to straighten the course, instead of letting themselves be carried away by the negativity, and thus put it in the right direction in a week.
"The Christmas break was good to reduce the nerves," say Rosenblatt Securities analysts, who see a clear disconnect between investor sentiment and the progress of the economy, "that amplifies any negative headline because they do not pay attention to the positive things". The Dow Jones showed less volatility than in previous days, although in the search for stability it was discussed between the negative and the positive during the start of the session.
Wall Street is on track to close the worst year in a decade. The S & P 500, which includes the largest listed companies, drags a fall close to 12%. The Dow Jones is similar. The Nasdaq is left 10%. If what is taken as reference is the last annual maximum, the three are in the bear market zone after falling close to 20%. As for the month of December, it could be the worst in parquet history if stress is maintained.
The tension is clearly reflected in the volatility index, which this Wednesday stood at 35 points. It skyrocketed 176% since October, when they began to dominate the doubts. This is despite the fact that the 10-year bond rate is 2.7%, compared to 3.2% just one month ago. Investors escape from equity and debt markets, as they are from energy. The price of a barrel of oil in the US is below $ 45.
The factors of this situation are multiple and are not new. The moderation of global growth, commercial litigation with China, the political situation in the United Kingdom and Italy and the correction in the big technology are the main catalysts of the refusal, to which was added the President Donald Trump's combative rhetoric towards the Federal Reserve and the political chaos in Washington for the construction of the wall with Mexico.
Trump is making it very clear that he is not happy with the work of the central bank and considers that his strategy is affecting the markets in a negative way, also to the economy. But even thinking that the central bank is wrong raising interest rates, the Republican considers it a good time to buy. "I have great confidence in our companies," he told a group of journalists on Tuesday.
"They are the best in the world and they are doing very well," insists Donald Trump, referring to the results they are publishing, "it is a tremendous opportunity to buy." The president's comments, however, are yet another reflection of his desperation. The same one that led the Secretary of the Treasury, Steven Mnuchin, to get in touch with the big bankers to calm the situation but without much success.
Kevin Hasett, president of the White House Council of Economic Advisers, says Donald Trump is "very happy" with the work that Steven Mnuchin is doing. "He has a very productive relationship," he says. And he added himself to the voices that since last Saturday are denying that he will force the departure of Jerome Powell from the Fed. His position, he says, is "100% insured."
That, however, will not prevent the US president from continuing to use Twitter to express his opinion openly about the normalization process of monetary policy. To the guarantees of the environment of economic advisers of the president, the data coming from the retail sector, which recorded the highest increase in six years of sales during the Christmas season, was added.