(CercleFinance.com) – Wall Street is expected to open lower on Friday morning, as risk aversion slowly regains the upper hand among investors as recession fears intensify.
Half an hour before the opening, the ‘futures’ contracts on the major New York indices drop between 0.6% and 1.1%, announcing a start to the session on a note of heaviness.
The general climate remains dominated by concerns about growth, which encourages investors to seek safe havens such as sovereign bonds, to the detriment of equities.
Over the whole week, shortened due to ‘Juneteenth’, the Dow Jones is currently down 1%, the Nasdaq is down 0.4% while the S&P 500 suffers a weekly drop of 0.6 %.
The relapse ends a streak of five straight weeks of gains for the S&P, its longest bullish streak since November 2021.
The dovish remarks made by Jerome Powell, the Fed Chairman, to Congress this week have fueled the prospect of further rate hikes.
At the same time, the recession seems to be gaining ground, as shown yesterday by the Conference Board’s leading indicator index, which has now been down for 14 consecutive months.
Many strategists are warning, however, that recessionary risk is not fully priced in given relatively high valuations and earnings growth prospects, which are at record highs.
In this context, investors experiencing a generalized aversion to risk and prefer safe values such as gold, German Bunds or US Treasury bonds.
At less than 3.71%, the yield on ten-year US Treasury bonds is down nine basis points and heading for a sharp decline over the week as a whole.
On the foreign exchange market, the dollar is gaining ground against the euro, but is falling against the yen, which benefits from its safe haven status.
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