The central banker’s aggressive tone on the second day of his six-month congressional hearing initially shocked Wall Street, but the decline in bond yields after the speech gave a signal of a counterattack to technology that dragged the US market into significant gains.
In particular, the industrial Dow Jones, which was found with losses of almost 200 units, finally closed having gained so many, strengthening by 0.65% to 30,678 units.
Following a similar course, the enlarged S&P 500 ended with a rise of 1% to 3,796 units, while as mentioned above, the technologically weighted Nasdaq had the performance of the day closing at + 1.6% and 11,232 units.
The head of the Fed Jerome Powell admitted today, on the second day of his six-month submission to Congress, that the possibility of a recession in the US is clearly possible now, although he stressed that the Fed is not trying to cause it in order to reduce inflation.
In each case, they have seized it, despite obstacles we can scarcely imagine. ”
At the same time, the growth rate of the American economy slowed down sharply in June, confirming the recessionary dynamics that are developing.
Against this backdrop, US bond yields have plummeted, with the 10-year US falling to a two-week low, paving the way for placements with growth companies such as technology, which are directly dependent on affordable borrowing costs.
Indicatively, Apple strengthened by 2.16%, Microsoft by 2.2%, Amazon by 3.2% and its Facebook parent Meta by 1.9%.
Elsewhere, the “big” S&P 500 traded lower, with strong energy losses (Schlumberger -8%, Valero Energy and Phillips -7% each), while defense industries such as basic consumer goods and services outperformed. utility, healthcare and real estate, all with profits of more than 2%.
In the same context, at the top of the Dow Jones ended Salesforce and Merck + 3.3%, while on the contrary Caterpillar sank by -4.85% and Chevron lost 3.6%.
In any case, the three market indices have set strong foundations to end tomorrow after a long upward week, with the Dow at + 1.7% so far, the S&P at + 2.4% and the Nasdaq at +2 , 9%, although the clouds of impending recession are increasing.
The central banker reiterated today that the Fed is still hoping for a mild economic downturn, but acknowledging that this is now difficult.
“It has become much more difficult with the events of recent months and especially with the war that has pushed up gas prices,” he said, although he noted that the Fed “does not believe a recession is inevitable.”
In the same climate, after Golman Sachs, Deutsche Bank and Citigroup all now estimate that the chances of recession are at 50% or more for 2023, UBS increased its own to 69%.
On the other hand, of course, JPMorgan surprised everyone by saying today that it believes that the US will avoid the recession and the market will cover in the second half of the year all the losses it lost in the first.
Elsewhere, on the labor market front, unemployment benefit levels remained close to a five-month high, but at around 230,000 which is a fairly low number overall.
At the same time, the US current account deficit jumped to a new record in the first quarter of the year to $ 291.4 billion, well above the $ 273.5 billion expected by analysts.