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Inflation concerns are dampening Wall Street

market report

US investors are currently in a rollercoaster of emotions. After interest rate hopes the day before, the mood turned today after surprisingly high producer prices. The DAX reached another record high.

Concerns about inflation dampened the mood on the US stock markets at the end of the week. The major US indices interrupted their recent record run and closed lighter.

The Dow Jones index of standard stocks held up best with only a moderate discount of 0.37 percent to 38,627 points. The broader S&P 500 ended trading 0.48 percent weaker at 5,005 points. The index on the Nasdaq technology exchange ended up being significantly down 0.82 percent at 15,775 places. The Nasdaq 100 selection index lost 0.9 percent to 17,685 points.

The topic of the day was new price data. Producer prices, a harbinger of consumer prices, rose by 0.3 percent in January compared to the previous month, while analysts surveyed had only expected 0.1 percent. On Tuesday, consumer prices had already shown that price pressure remains high. Investors who had hoped for interest rates yesterday after weak retail data reacted with uncertainty today. The monetary policy course of the Federal Reserve (Fed) is not becoming any easier to anticipate given the recent change in price data.

“We continue to believe inflation is moderating. The data doesn't move in a straight line, there will be bumps along the way,” said Brian Klimke, chief market strategist at Cetera Investment Management. However, if prices remain high, the US Federal Reserve's first interest rate cuts could take longer than expected.

“June is currently looking more and more likely,” said Klimke. Traders on the money market currently see the probability of an easing in May at only around 34 percent. At the beginning of the year, investors were still expecting the first interest rate cuts in March. The market is increasingly not expecting the Fed to take the first easing steps until the second half of the year.

Incidentally, US investors are facing a long weekend: There will be no trading in the United States on Monday because of the holiday “Washington's Birthday”, also known as “Presidents' Day”.

The DAX remained on the hunt for records at the end of the week. The record set just yesterday at 17,089 points has long been history. Today it rose by 0.9 percent to 17,198 points before investors retreated again. In the end, the leading German index closed at 17,117 points, 0.42 percent higher, a weekly gain of a good one percent. The MDAX of medium-sized stocks also rose by 0.35 percent to 26,148 positions.

The DAX appears to be holding above the long-contested mark of 17,000 points, which chart analysts in particular interpret as positive. Because a fresh record high is considered one of the best buy signals that technical analysis has to offer. From this perspective, the DAX has a good chance of further price gains. HSBC expert Jörg Scherer puts the price target for the German standard stocks at 17,450 points.

However, it will only become apparent over the course of the new trading week how sustainable today's strong price gains in the DAX are, as today is an expiry day on the Eurex futures exchange.

The stock market's main source of hope continues to be the prospect of falling interest rates, even if ECB boss Christine Lagarde recently curbed expectations. From the perspective of the central bank(s), the time is not yet ripe for easing; leading US central bankers have repeatedly made similar statements. But the stock market is looking ahead, and every economic figure is closely examined with regard to its potential for central bankers to make decisions.

In addition, despite weak economic forecasts, corporate balance sheets have not yet shown any major weaknesses across the board. “The reporting season is almost over and the fourth quarter figures have shown that companies can cope with higher interest rates for a longer period of time,” said analyst Jochen Stanzl from broker CMC Markets.

The euro tended to be little changed at the end of European trading after a rollercoaster ride. Most recently, $1.0775 was paid again in US trade. The euro came under pressure at times in the afternoon after the dollar gained against all major currencies. The common currency briefly fell to $1.0732, but quickly recovered. The European Central Bank set the reference rate at 1.0768 (Thursday: 1.0743) dollars.

Meanwhile, contradictory statements about future monetary policy came from the ECB. The head of the French central bank, Francois Villeroy de Galhau, warned that interest rates could be lowered too late. In his opinion, the risk of acting too late is “at least” as great as acting prematurely. However, ECB Director Isabel Schnabel warned against easing the restrictions too early. The central bank's direction must remain tight until one can be confident that inflation will fall sustainably to the target of two percent.

Increasing tensions in the Middle East drove oil prices up again. North Sea Brent rose in price by 0.7 percent to $83.36 per barrel. US light oil WTI rose by one percent to $78.31. Israeli Prime Minister Benjamin Netanyahu has repeatedly announced a military offensive in the south of the Gaza Strip, increasing concerns about an escalation of the conflict with the radical Islamic group Hamas. Speculation about declining oil demand had previously pushed prices into the red.

The Volkswagen Group started the new year with a significant increase in sales. In January, the group delivered 698,200 vehicles of all group brands worldwide – 13.3 percent more than in the same month last year. This was mainly due to a base effect: In the same month of the previous year, significantly fewer vehicles were sold in China due to the Corona restrictions at the time and the New Year celebrations taking place in January. VW shares rose with the market.

The next pilot strike is imminent at Lufthansa subsidiary Discover Airlines. The Cockpit Association (VC) union has called on its members to go on a three-day strike starting on Saturday. The end of the strike is scheduled for Monday at 11:59 p.m. The VC announced yesterday that the aim is to reach a timely and fair conclusion on remuneration and the general tariff.

According to insiders, the talks between Thyssenkrupp and the Czech billionaire Daniel Kretinsky's energy company EPH about a steel joint venture are turning into a deadlock. For an agreement to be reached, the new business plan for the steel division, which Thyssenkrupp boss Miguel Lopez is currently having drawn up, must be available, several people familiar with the matter told the Reuters news agency today. However, the relevant price negotiations with the automotive industry have not yet been completed.

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Applied Materials exceeds market expectations with its second quarter forecast. The American chip supplier is expecting sales of $6.50 billion (plus or minus $400 million), as the company announced yesterday after the US stock market closed. Analysts previously expected $5.92 billion. Applied Materials pointed to a recovery in the PC market and increasing demand for artificial intelligence applications. The shares rose significantly in New York.

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