Economic Contraction

US stocks manage afternoon rally as Dow adds nearly 200 points

4:10 p.m .: Recession is a “possibility”, says Powell

The Dow Jones closed Thursday up 195 points, 0.6%, at 30,678, the Nasdaq Composite added 179 points, 1.6%, at 11,232 and the S&P 500 improved 36 points, 1 %, at 3,796.

The benchmarks spent some time in the red around noon but managed to rebound in the afternoon.

Federal Reserve Chairman Jerome Powell testified again before Congress on Thursday, noting that a recession is a “possibility,” according to media reports.

“The market action we saw today and yesterday at least on the insides suggests that the market is increasingly concerned about global economic growth, evidenced by the fact that the front end of the curve US yield is, rates are going down a lot,” said Scott Ladner, chief investment officer at Horizon Investments, CNBC reported.

12:05 p.m .: New slowdown in demand

US stocks were mixed midday as new data showed the US manufacturing sector lost its growth momentum in early June – plunging to a 23-month low.

By midday, the Dow Jones Industrial Average had lost 101 points to 30,382 points and the S&P 500 was stable at 3,759 points.

The Nasdaq Composite, on the other hand, had gained 67 points to 11,120 points.

The flash S&P Global Manufacturing PMI fell to 52.4 in June from 57 in May, below market expectations of 56.

The flagship PMI hit a five-month low of 51.2 from 53.6 in May, again below Bloomberg consensus analyst expectations of 53.

S&P Global Market Intelligence Chief Economist Chris Williamson noted that the pace of U.S. economic growth slowed sharply in June, with deteriorating forward-looking indicators paving the way for economic contraction in the third quarter.

“Having benefited from a mini-boom from consumers returning after the easing of pandemic-related restrictions, many service businesses are now seeing households increasingly struggling with the rising cost of living, producers of non-essential goods seeing a similar drop in orders,” Williamson said. .

Meanwhile, talk of the recession continued on the second day of Fed Chairman Jerome Powell’s congressional testimony.

OANDA’s senior market analyst Craig Erlam said slowly but surely central banks are coming to grips with the idea that recessions could be the price to pay for price stability, which came to light during of Powell’s appearance.

“Referring to a recession as ‘certainly a possibility,’ the Fed chairman appears set to wave the white flag on the economy, following in the footsteps of his peers,” Erlam said.

“A recession is obviously not the desired outcome, but it could in theory mean that interest rates won’t rise as much. That’s still not a good reason for stock markets to experience a meaningful recovery. outlook is uncertain at best until inflation data shows signs of improvement.

9:35 a.m.: Wall Street climbs higher

U.S. stocks opened higher on Thursday as Fed Chairman Jerome Powell’s congressional testimony entered its second day.

Just after opening, the Dow Jones Industrial Average had added 146 points to 30,629 points.

The S&P 500 gained 23 points to 3,783 points and the Nasdaq Composite gained 99 points to 11,152 points.

Software provider Snowflake jumped about 6% at the open after the stock was upgraded from “neutral” to “overweight” at JP Morgan.

Meanwhile, Kohl’s Corporation opened slightly lower after falling nearly 9% yesterday following reports that Franchise Group, which is offering to buy the department store chain, wants to cut its bid to $50. per share against $60.

6:30 a.m.: More volatility seen

U.S. markets were expected to open in mixed fashion on Thursday as U.S. Federal Reserve Chairman Jerome Powell prepares for a second day of testimony before Congress, having previously warned of the likelihood of a recession on Wednesday.

Powell also said achieving a soft landing for the economy would be difficult, noting that inflation will remain high for the foreseeable future and will hurt the broader economy.

Futures on the Dow Jones Industrial Average fell 0.4% in premarket trading, while those for the broader S&P 500 index rose 0.3% and contracts on the Nasdaq-100 increased by 0.3%.

“Market optimism couldn’t survive Jerome Powell’s testimony yesterday as he said a recession is possible and a soft landing is ‘very difficult’ under the current circumstances,” Ipek said. Ozkardeskaya, senior analyst at Swissquote Bank.

“More worryingly, Powell mentioned another risk: the risk that the Federal Reserve will fail to restore price stability and allow inflation to take root in the economy,” she added.

The gloomy outlook for the world’s largest economy weighed on stock prices as investors were reluctant to take new positions. With Powell testifying again today, investors are hopeful that most negative pricing is now gone, but there are growing fears that the Fed may be losing the battle with inflation and its aggressive rate hikes could dampen growth. economic growth and negatively impact business results.

As Powell appears before Congress, his remarks will come under scrutiny, suggesting stock markets are poised for another choppy session.

In energy markets, WTI crude oil futures lost 0.7% to $105.42 a barrel and Brent crude oil futures lost 0.6% to $111.07, amid fears that global economic growth will weaken.

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