Controlled losses on Wall Street amid countervailing forces

In search of balance, the indices of the American market are moving mild losses, while investors evaluate on the one hand the positive messages of the Fed yesterday and on the other hand the coldness of the GDP today.

In particular, after the positive opening for all three indices, the Dow Jones industrial average is trading at 32,040 points down 0.5%, the broader S&P 500 is down 0.6% moving to 3,998 points, as is the technology-weighted Nasdaq which is marked losses of 0.9% at 11,919 units.

In news of the day, the US economy shrank again in the second quarter amid aggressive monetary policy tightening by the Federal Reserve to tackle the highest inflation in 40 years, defying analysts’ expectations of little recovery.

In particular, after contracting by 1.6% in the first quarter, US GDP fell again at an annual rate of 0.9%, while the average estimate of analysts in Reuters expected an increase of 0.5%.

The technical definition of a recession requires two consecutive quarters of decline in GDP, however the relevant US Bureau of Economic Research defines a recession as “a significant decline in economic activity, covering the entire economy, lasting more than a few months, usually visible on production, employment, real income and other indicators”.

In any case, the indices are coming off an extremely strong session with gains of more than 3%, as statements by Fed Governor Jerome Powell, after the – expected – second consecutive rate hike of 0.75%, appeared to significantly reassure the investors.

The Fed chairman did not rule out another aggressive hike, perhaps as much as 75 basis points again, but indicated that as the bank moves to further tighten monetary policy, it seems more appropriate to slow the pace of hikes.

In this climate, after all, Jeffrey Gundlach, the CEO of DoubleLine Capital, expressed on CNBC yesterday after the close his belief that the US central bank is no longer behind inflation and that Powell has regained his credibility.

Elsewhere, the stock of Meta, the parent of Facebook, is sinking by more than 8%, after the disappointing results that Mark Zuckenberg’s giant announced yesterday.

The company’s second-quarter numbers came in slightly below market estimates, but more concern was caused by the fact that it significantly downgraded its revenue estimates for the next quarter.

Finally, in the rest of the day’s macroeconomic news, after three straight weeks of gains, initial jobless claims fell slightly by 5,000 to 256,000 for the week ended July 23.