The US market is looking for its first week after three declines, which seems to have found a step after the fall in oil prices and the increasing chances of an upcoming recession are estimated to reduce the Fed’s aggression with interest rates.
In particular, the Dow Jones industrial average strengthened by 1.9% or 576 units and moves on 31,253 unitsthe enlarged S&P 500 is on the rise 2.2% at 3,878 unitswhile like yesterday the best performance of the day is presented by the technologically weighted Nasdaq that trades on 11,520 units with + 2.6%.
On a weekly basis, the Dow Jones is at + 3.7%, the S&P 500 at + 5.6% and the Nasdaq at + 6%.
Mohamed El-Erian spoke to CNBC about a “relief rally” that is welcome, but pointed to worrying signs, such as those in the bond market that are pricing an increased risk of an impending recession.
“The market says ‘oops, be careful’ because the economy is weakening not just in the US, but around the world. So there are two different narratives right now in the stock market and in the bond market. And the key issue is that for another “Once again, the bond market is what drives the Fed, not the Fed,” he said.
Otherwise, volatility may be higher today as the mid-cap FTSE Russell rebalances the year by changing the composition of the indices, which is usually accompanied by large trading volumes.
Among the major changes will be the additions to the Russell index of 1,000 tech companies such as Facebook parent company Meta and Netflix following the decline of their titles this year.
Meta shares, however, are up 5.7% today, while Netflix is up 3.7%.
On the other hand, investors are expecting new macroeconomic data to reassess the chances of an impending recession, in which the big houses give more than 50% chances for 2023 (Goldman, Citi, Deutsche) while UBS raised its own to 66% .
For his part, Fed Chairman Jerome Powell admitted yesterday, on the second day of his half-yearly submission to Congressthat the possibility of a recession in the US is clearly possible now, although he stressed that the bank is not trying to cause it in order to reduce inflation.
The chairman of the Federal Reserve Bank of St. Louis, James Boulard, moved in a different direction today, however, who estimated that the worries about a recession in the US are excessive, as consumers have a lot of liquidity that accumulated during the Covid-19 pandemic.
“In fact, I think we’re going to be okay,” Boulard said in a speech at a Zurich event today.
At the same time, he stressed that the US Federal Reserve must act boldly in raising interest rates and curb inflation before higher expectations are consolidated.