Positive turn at close of trading
Recession worries continue to weigh on Wall Street
05/20/2022, 10:44 p.m
After some very high losses at times, Wall Street still managed to jump into positive territory at the close of trading – albeit extremely narrowly. The surprising interest rate cut by the Chinese central bank ensures slight gains for a short time. But economic worries remain.
At the end of the week, concerns about a recession on Wall Street were still in focus. After a volatile course, with strong losses at times, the indices were able to largely recover in late trading. The Dow Jones index and the S&P 500 even turned slightly into positive territory. The S&P 500, meanwhile, had slipped into bear market mode – defined by a 20 percent slump since the most recent high. Fears of a significant slowdown in the economy, triggered by the US Federal Reserve’s planned interest rate hikes to get the high inflation under control, continued to dominate. The small decline also provided additional volatility.
“We need to gather more evidence to convince the markets that a soft landing is possible,” said Arun Sai, multi-asset strategist at Pictet Asset Management, referring to the Fed’s goal of shrinking the economy that far slow enough to contain inflation, but not to the point of creating a recession.
Of the Dow Jones Index gained 9 points to 31,262 points. Of the S&P 500 increased by one point. For the Nasdaq Composite on the other hand, it fell by 0.3 percent. On the Nyse, 1,463 (Thursday: 1,709) winners faced 1,808 (1,574) losers, with 134 (138) titles closing unchanged.
The surprising interest rate cut by the Chinese central bank prompted slight gains on Wall Street at the opening. This lowered the five-year loan prime rate by 15 basis points to 4.45 percent and left it at 3.70 percent for the one-year period. The move continues a series of central bank measures to shore up China’s flagging economy. This is currently suffering from the zero-Covid policy of the government in Beijing, which is accompanied by strict contact and movement restrictions.
Bad news from retail
Important economic data were not due for publication. However, new bad news came from the retail industry. After several industry companies had already presented disappointing business figures during the week and reported that high inflation was affecting private consumption, which is so important for the US economy Ross stores reported a drop in sales in the first quarter and warned of further falling sales in the second quarter. The stock fell 22.5 percent.
On the other hand, the retail chain specializing in sports shoes Foot Locker (+4.1 percent) were positively surprised with their quarterly report. The company is also confident of being able to reach the upper end of its forecast ranges. for Palo Alto Networks (+9.7 percent) things went better than expected in the third business quarter. The company, which specializes in network security, is also more optimistic than the analyst consensus for the current financial year.
Applied Materials (-3.9 percent) did not increase sales and profits in the second fiscal quarter as much as analysts had predicted, but the company reported unprecedented demand. However, due to supply chain issues, the company issued a sales guidance for the current quarter that is below circulating estimates.
Dollar stabilizes
The dollar has recovered slightly after the recent pullback. Of the dollar index increased by 0.3 percent. Market participants also referred to statements by Esther George, President of the Federal Reserve Bank of Kansas City. She had stated that interest rates must continue to rise in order to curb inflation. In a CNBC interview, George stressed that policymakers are not focusing on the impact of rate hikes on the stock market.
Bonds rallied as the stock market rallied again. The surprising reduction in interest rates in China had in the meantime caused investors to take a slightly higher risk appetite. But with the ongoing recession worries, the search for the “safe haven” bonds began again, it was said.
Of the gold price recorded only a small plus. Here, the recovery in the dollar prevented more significant gains. However, the precious metal ended a trading week with a profit for the first time in a month.
They were very volatile oil prices, which eventually gained up to 0.8 percent. The market was caught between fears of a recession and the hope that an early easing of contact and movement restrictions in China would allow demand for oil to rise again, it said.