Weak subscriber growth reported Thursday night at Netflix Inc sent its shares tumbling 21.8% and casting a pall in a market already reeling from fears that the Federal Reserve is tightening monetary policy too aggressively to fight the coronavirus crisis. ‘inflation.
Investors await details from the Fed’s policy meeting next week on how it will proceed at a time when inflation is such a burning political issue that it could force a more hawkish stance.
The data, however, won’t start showing an expected slowdown in consumer price inflation for at least a few months, making it harder for Fed Chairman Jerome Powell as he tries to calm down. the steps.
“We know the Fed is starting to pivot and the problem is that the inflation numbers aren’t going to start falling until late spring,” said Andrew Slimmon, managing director of Morgan Stanley Investment Management.
Despite Netflix’s negative earnings, it’s too early to tell whether business fundamentals won’t remain strong, he said.
In Europe, the German, French and Italian indices fell nearly 2%, with the broad Euro STOXX index of the top 600 regional companies closing down 1.84%. The MSCI All Country World Index fell 1.74%.
On Wall Street, the Dow Jones Industrial Average slipped 1.30%, the S&P 500 fell 1.89% and the Nasdaq Composite lost 2.72%. The S&P 500 and Nasdaq both posted their biggest weekly declines since the market collapsed in March 2020.
As the Fed prepares to hike interest rates up to four times this year, fear of a hard landing has grown among investors. But a slowing economy in the coming months will likely give the Fed second thoughts, said Steven Ricchiuto, chief U.S. economist at Mizuho Securities USA LLC.
“By the time we get to the second rate hike, everything will be unfolding enough for everyone to back down from these calls,” he said. “Growth numbers will slow much faster than the Fed had anticipated.”
Yields on US Treasuries and Eurozone government bonds fell as concerns over a potential conflict in Ukraine also dampened risk appetite and stock market declines increased demand for the debt.
The yield on 10-year Treasury bills fell 7.2 basis points to 1.762%, a sharp decline from the two-year high of 1.902% hit on Wednesday.
Overnight markets in Asia were broadly lower, including in China where benchmark mortgage rates were cut on Thursday in the latest move to support an economy embittered by its property sector.
The US dollar edged lower along with US Treasury yields, with investors looking to next week’s Fed meeting for clarity on the outlook for rate hikes and quantitative tightening.
The dollar index, which tracks the greenback against a basket of six currencies, fell 0.138% to 95.627. The yen was last down 0.40% at $113.6300. The euro was last up 0.30% at $1.1344.
Oil prices fell for a second day, pressured by an unexpected rise in U.S. crude and fuel inventories, as investors took profits after global oil benchmarks hit highs in seven years.
Brent futures fell 49 cents, or 0.6%, to $87.89 a barrel, while U.S. futures fell 41 cents to $85.14 a barrel. barrel.
Gold was expected to gain a second week as inflation and geopolitical risks boosted its safe-haven appeal, but it slid on Friday amid a broader commodity decline.
US gold futures fell 0.6% to $1,831.80 an ounce.