Wall Street ends higher and bets on a short recession

Wall Street ends up and bets on a short recession

UPGRADE DAY

The New York Stock Exchange ended higher on Thursday after a seesaw session over a new hearing in Congress of the Chairman of the Fed who once again showed his determination to fight inflation.  

According to final results at the close, the Dow Jones index gained 0.64% to 30,677.36 points. The tech-dominated Nasdaq climbed 1.62% to 11,232.19 points. The S&P 500 gained 0.95% to 3,795.73 points.

“The recession is always the central point of debate on Wall Street,” noted Edward Moya of Oanda. 

But for Karl Haeling, an expert at LBBW, a change in investors' expectations of rate hikes seemed to show that fear of recession could be short.

“It was a very interesting day. A week ago the market was pricing overnight (Fed) rates over 4% and seeing them peaking in Q3 2023. Now it sees them rising to 3.5% with a peak in the 1st quarter of 2023”, noted the analyst. 

Investors therefore saw a faster rise in rates over time, corresponding to a shorter economic slowdown.

< p>Yields on 10-year Treasury bills, which move in the opposite direction to the prices of these bonds, eased significantly to 3.08% against 3.15% the day before. 

Those to two-year also moved strongly closer to the 10-year good at 3.00%, a “curve flattening” generally interpreted as a sign of a short-term recession.

“At the same time, we is witnessing a global rebalancing of prices, such as those of raw materials which are at their lowest in fifteen months or those of energy which are at their lowest in one month”, underlined Mr. Haeling.

“We find ourselves having to make big decisions on the stock market,” he said to explain the changing mood of prices. 

“Do we have to sell because we going into a recession or are we buying because the magnitude of the rate hikes is going to be less and faster than we thought?”

Before a committee of the House of Representatives, for his second day of annual hearing in the American Congress, the chairman of the Fed, Jerome Powell, “maintained his hawkish position in the fight against inflation”, indicated Edward Moya. The head of the Central Bank reiterated that the fight against inflation, at its highest in 40 years, remained “unconditional”.

For Quincy Krosby of LPL Financial, the market hesitated between appetite and aversion to risk “until, like the Fed, it sees hard evidence that inflation has plateaued.”

Seven of the eleven S&P sectors ended in the green, starting with health services (+2.22%) and real estate (+2.01%), but energy (-3.74% ) and materials (-1.40%) led the decline.

Express carrier FedEx jumped 2.91% to $234 in electronic trading after the close as the group projected profits up for FY2023.

As the energy sector suffered a poor session in the wake of falling crude prices, oil company Occidental Petroleum Corporation kept its head above the rest water (+0.57% to 56.09 dollars).

Warren Buffet's fund, Berkshire Hathaway, further increased its stake by buying some 9.5 million additional shares this week, according to documents provided to the SEC stock exchange authority.

The American tobacco company Altria, which owns 35% of the shares of Juul Labs whose FDA banned the sale of electronic cigarettes on Thursday, has reb ondi of 2.43%. The title had fallen the day before by more than 9% pending the decision of the American health authorities.