Wall Street ends higher and bets on a short recession

The New York Stock Exchange ended Thursday up after a choppy 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 the debates 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-lived.

“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.

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.

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

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

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

“Do we have to sell because we are entering a recession or do we buy because the magnitude of the rate hikes is going to be smaller 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 boss of the Central Bank reiterated that the fight against inflation, at its highest for 40 years, remained “unconditional”.

For Quincy Krosby of LPL Financial, the market was torn between risk appetite and risk aversion “until, like the Fed, it saw hard evidence that inflation had 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 higher profits for fiscal 2023.

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

Warren Buffet’s Berkshire Hathaway fund increased its stake further by buying some 9.5 million more shares this week, according to documents provided to the SEC.

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


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