Stocks end in green; The Federal Reserve may slow rate hikes
Last updated 4:15 PM EST
Stock indexes ended today’s trading session strongly in the green after the Federal Reserve raised interest rates by 75 basis points. Jerome Powell stated that rate hikes will likely slow, which means the Federal Reserve may not be as aggressive as most had believed. The Dow Jones Industrial Average, S&P 500 and Nasdaq 100 rose 1.37%, 2.61% and 4.26%, respectively.
The public services sector (XLU) was the laggard of the session as it rose just 0.08%. Instead, the technology sector was the leader of the session, with a gain of 4.29%. Also, WTI crude rose 2.7% as it sits just above $98 a barrel. It is currently near a session high of $98.56 per barrel.
Also, the US 10-year Treasury yield fell to 2.79%, while the two-year Treasury yield also fell to around 2.99%. This makes the spread between them -20 basis points. The negative spread indicates that investors are still afraid of a recession.
As a result of Powell’s comments, the market has a higher chance of a Fed funds rate cut by the end of the year compared to last week. In fact, market expectations for a rate in the 3.75% to 4% range fell to 3.8%, which is lower than last week’s expectations of 25.9% . In addition, the market now also assigns a probability of 44.6% to a range of 3.25% to 3.5%. For reference, investors had assigned a 24.1% chance a week ago.
Pending decrease in housing sales during the month of June
Last updated 3:00PM EST
Shares are in the green towards the final hour of today’s trading session. As of 3:00 PM EST, the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 are up 1.2%, 2.3% and 3.9%, respectively.
On Wednesday, the National Association of Realtors released its pending home sales report, which measures the month-over-month change in the number of home sales that have not yet closed but are under contract to sell. . This measure excludes newly built homes.
During the month of June, pending home sales fell significantly by 8.6% from May, which was substantially worse than the expected -1.5% decline. That comes after the May report snapped a six-month streak of declines that began with the December report.
Additionally, the Pending Home Sales Index stood at 91, which is lower than the June 2021 reading of 112.7. This equates to an approximate 19.3% year-over-year decline.
As a result, the overall sales trend is down as the cost of borrowing continues to rise and more homes come on the market. This has also caused homes to sit on the market for longer periods of time because there are fewer buyers who now have more options to choose from.
Core orders for durable goods are coming in better than expected
Last updated at 12:15pm EST
Shares are in the green midway through Wednesday’s trading session. As of 12:15 pm EST, the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 are down 0.4%, 1.5% and 2.9%, respectively.
On Wednesday, the Census Bureau released its U.S. Basic Durable Goods Orders report for June, which measures the change in the order value for durable goods. This report excludes the impact of aircraft orders because they tend to be very volatile. Therefore, it is generally agreed that core reading provides a better indicator of sorting trends.
During the month of June, orders for basic durable goods grew by 0.3%, which was better than the 0.2% expected in month-on-month terms. This is down from the previous month’s reading of 0.5%.
Including aircraft orders, growth was also 1.9%, crushing expectations of -0.5%. This shows that demand for high-volume items is still there, especially when it comes to aircraft orders, as consumers continue to spend.
However, it is important to remember that this is a lagging indicator, meaning that current demand may be much lower as inflation continues to affect people’s purchasing power. However, the market seems to like what it sees in today’s report.
Shares are in the green to start Wednesday’s trading session
Last updated 10:00 AM EST
Stock indices are in the green after 30 minutes of today’s trading session. As of 10:00 am EST, the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 are up 0.5%, 1.2% and 2.3%, respectively.
The materials sector (XLB) is the laggard so far, down 1%. On the other hand, the technology sector (XLK) is the leader of the session with a gain of 2.8%.
WTI crude remains below $100 a barrel as gasoline demand remains below pre-pandemic levels, which is the result of high prices at the pump. However, physical markets remain insufficient. As a result, the price is around $95 per barrel, an increase of about 0.5% from the previous close.
Meanwhile, bond yields are lower, with the US 10-year Treasury yield now hovering around 2.77%. This represents a decrease of four basis points from the previous close.
Opposing movements can be seen with the two-year yield, which is now at 3.06%, meaning the spread between the 10-year and two-year US Treasury yields remains negative and is widening, as it currently stands at -29 basis points. .
Pre-market update
Stock futures rose early Wednesday as investors await the Federal Reserve’s interest rate hike, to be announced later in the day.
Dow Jones Industrial Average futures (DJIA) gained 0.52%, while those of the S&P 500 (SPX) was up 1% as of 5:46 a.m. EST on Wednesday. Meanwhile, the Nasdaq 100 (NDX) futures advanced significantly by 1.57%.
After-hours market sentiment was boosted by strong quarterly results from energy technology company Enphase Energy (ENPH), which led to a 6% increase in the share price. In addition, the operator of the Chipotle restaurant chain (CMG) also rose about 8% in the extended trading session.
Here’s what happened on Tuesday
Tuesday was a busy day of mixed earnings results from major blue-chip companies. Walmart’s (WMT) cut in profit guidance sparked fresh concerns about reduced discretionary spending amid high inflation and a recession, and that weighed heavily on retail shares.
Additionally, Shopify (SHOP) News of workforce cuts puts pressure on e-commerce stocks, including Amazon (AMZN), Block (SQ), and PayPal (PYPL). General Motors (GM) also lost investors after failing to meet Wall Street’s earnings expectations
Again, Coca-Cola (IS), McDonald’s (MCD), and General Electric (GE) jumped in with solid results.
In response to these earnings releases, as well as other macroeconomic updates, the S&P 500, Dow and Nasdaq 100 fell 1.15%, 0.71% and 1.96%, respectively.
Investors are awaiting earnings reports from Boeing (B.A) and Shopify before the market opened on Wednesday. In addition, Qualcomm (QCOM), Ford (F), and Metaplatforms (TARGET) are scheduled to report after the market closes for the day.
The IMF warns of a global recession
Most importantly, on Wednesday the Federal Reserve will announce its latest decision on interest rates, which are likely to be valued at 75 basis points.
Fears of a recession are widespread in the economy and the fears were reinforced on Tuesday by the International Monetary Fund. The international financial body warned of a global recession in the near future as major economies such as the US, China and Europe experience a sharp slowdown. In addition, the IMF also expects growth to slow further in 2023 as central banks tighten their monetary policies to combat stubborn inflation.
The IMF now expects global growth to slow to 3.2% in 2022, after growth of 6.1% in 2021. This is the third time the institution has cut its growth forecast by 2022. Moreover, global growth is expected to slow further to 2.9% in 2023, well below the April projection of a 3.6% expansion.
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