Fear of recession puts the brakes on
Dow is stuck
05/12/2023, 11:21 p.m
Subdued consumer sentiment and the ongoing dispute over the debt ceiling give US investors a sluggish end to the week. Tesla shares slump after CEO Musk announces he will hand over Twitter leadership.
Indications of a deteriorating consumer climate in the USA weighed on share prices on the US stock exchanges somewhat on Friday. The Dow Jones Index dropped 9 points, S&P 500 and Nasdaq Composite lost 0.2 and 0.4 percent respectively. The index for consumer sentiment in the USA calculated by the University of Michigan fell surprisingly significantly in the middle of the month. With private consumption accounting for around two-thirds of US economic output, this fueled fears of a recession towards the end of the year, although the economic downturn suggests an end to interest rate hikes.
Import prices at least suggested a break in the US Federal Reserve’s rate hike cycle. They gained a bit more than expected in April after falling earlier. Over the year, however, prices fell by 4.8 percent. This does not shake the picture of gradually weakening inflation.
In addition to recession worries, the unresolved dispute over the debt ceiling dampened sentiment. If no agreement is reached, the United States could become insolvent as early as next month. In the background, the fear continued to smoulder that the problems of some regional banks could escalate into a broad banking crisis. Signs of relaxation in the relationship between the USA and China were positively received in retail. National Security Advisor Jake Sullivan met with his Chinese counterpart this week. Washington and Beijing are trying to prevent relations from deteriorating further. “From a market perspective, this helps ease the pressure,” say analysts at Pictet Asset.
Investors celebrate News Corp numbers
The A shares of news corp increased by 8.5 percent. The media group performed better than expected in its third business quarter despite a decline in sales. This was thanks to the growth of the Dow Jones subsidiary, which owns the Wall Street Journal and this news agency, among others.
Tesla lost 2.4 percent. Twitter owner Elon Musk intends to hand over the top post at the online platform to advertising manager Linda Yaccarino shortly, as he has now confirmed. On Thursday after the market closed, Musk initially only announced that a woman would succeed him, which led to speculation about the personnel. With the resignation from the post of Twitter CEO, Musk should have more time to take care of his other companies like Tesla, speculated in the trade. However, a recall of 1.1 million vehicles in China due to brake defects quickly pushed the personnel decision into the background.
The school bus manufacturer Bluebird was not only in the black in the quarter under review, but also increased the outlook. The course then shot up by more than 36 percent. Shift Technologies lost 14.1 percent. The operator of an online marketplace for used cars is examining strategic alternatives such as the sale of business units after a significant drop in sales in the most recent quarter.
Daktronics secured, among other things, additional capital of 100 million dollars via a credit facility. The electronics manufacturer’s shares rose by 6.1 percent.
Dollar rises and falls with debt limit
The dollar picked up a bit more, the dollar index gained 0.6 percent. The FX market continued to be very sensitive to debt ceiling headlines. The lack of progress towards an agreement may well continue to provide some support for the dollar, ING said.
The oil prices gave back interim gains. In addition to the firmer dollar, news that a pipeline between Iraq and Turkey could start operating again over the weekend weighed on shares. This would bring more supply to the market and weigh on crude oil prices, it said.