S&P 500 recovers the 3,850 thanks to an optimistic sentiment and the disappearance of recession fears

• The S&P 500, the Nasdaq and the Dow Jones extend gains between 4 and 5% in the week.
• UoM Consumer Sentiment slumped and inflation expectations were lowered, which was seen as relief by traders.
• The Fed’s Bullard said fears of a recession are overblown.

US equities is up for the second day in a row and despite being in the middle of the North American session, the major indices are set to post solid gains for the week, within the 4%-6% range.

The S&P 500 recovered the 3,800 level around 3,887.19 and is up 2.74% on the day, while the tech-heavy Nasdaq Composite Index did the same, gaining 2.36% to 11,498.82, followed by the Dow Jones Industrial (DJIA), which rose 2.15%, advancing to 31,330.63.

As for the sectors, the most outstanding are the financial sector, which rose 3.43%, followed by communication services and materials, which recorded gains of 3.16% and 3.11%, respectively. Sectors lagging the most, but also rising due to increased risk appetite, are Healthcare, Consumer Goods and Utilities, which posted decent gains of 1.46%, 1.27% and 0.92% each.

Equities rose as investors reassessed expectations of a Federal Reserve rate hike. Fears of a US and global recession loom over EU, UK and US global PMIs, all expanding but showing signs of slowing. Taking the above into account, traders are beginning to price in a “possible” rate cut, which seems too early to forecast as the global economy settles on higher interest rates.

Later, the University of Michigan Consumer Sentiment, in its final reading for June, tumbled towards 50, a disappointing reading, but inflation expectations softened, which was a relief to investors, who turned to equities heading into the weekend.

St. Louis Fed President James Bullard went on to talk about the Louis Fed. He said fears of a US recession are overblown and said the US will be fine and the policy tightening will slow the economy to trend growth. He reiterated that the Federal Funds Rate (FFR) should be at 3.5% this year.

The US Dollar Index (DXY), which measures the USD against some currencies, is down 0.20% at 104.196, while the 10-year US Treasury yield recovers some ground, rising five basis points, with a yield of 3,123%.

In the commodity complex, benchmark US crude, WTI, rose 2.22%, trading at $106.81 BPD. Meanwhile, precious metals such as gold (XAU/USD) are down 0.04%, trading at $1,829.05 a troy ounce.

SP 500 Chart

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