The market reflects massive buying, with major stock indices in the green: The Dow Jones up 238 points or 0.74%, the S&P 500 up 35 points or 0.87%, and the Nasdaq up 99 points or 0.82%.
And it is that inflation expectations suggest that the index is cooling down and that it could drop to 8% or 8.1%. If so, investors assume the US Federal Reserve would be under less pressure to continue raising interest rates at the current fast pace.
“The possible moderation of inflation is what generates the good mood in the financial markets at the beginning of the week. Much of the decline would be explained by the significant drop of 50% in the price of US gasoline from the maximum of the year ”, explains Jorge Gordillo, director of economic and stock market analysis at CiBanco.
Although bets continue to lean towards a 75 basis point hike at the next meeting on September 21 , and a 4% interest rate by the end of the year, nerves have subsided and risk aversion is beginning to subside.
Added to the positive perspectives of a possible cooling of inflation are Ukraine’s latest movements in the war, after the Russian invasion in February. The Ukrainian army has recaptured key territory in the eastern part of the country and has pushed some Russian troops into retreat.
“The situation between Russia and Ukraine is creating some glimmers of hope for the market that there could be a resolution and provide some relief to the intensity of the energy shock,” Hani Redha, a multi-asset portfolio manager at firm PineBridge, was quoted as saying by Reuters. Investments.
Indeed, the euro reached a six-month high, after the European Central Bank applied a harsh rate hike, but also fueled by plans to cut energy bills. The European Union wants to reduce energy use and establish a tax on the profits of energy companies to face the crisis.
Among the most active stocks are technology stocks, such as Apple (NASDAQ: AAPL ) which is up 2.81%, boosted above all by its latest launch of the iPhone 14, and Tesla (NASDAQ: TSLA ) and Amazon (NASDAQ: AMZN ), which are up between 1% and 1.5%.