Worries about recession remain
Wall Street recovers after a weak week
06/21/2022, 10:36 p.m
The US stock exchanges are experiencing an upswing after a long weekend. The splitting of the Kellogg cereal company into three companies is well received by investors. Tesla’s planned job cuts push the stock higher. High inflation continues to be a focus on Wall Street.
After a long weekend and the weakest week since 2020, Wall Street has posted sharp increases. Of the Dow Jones Index rose by 2.1 percent to 30,530 points. Of the S&P 500 closed 2.4 percent higher. Of the Nasdaq Composite gained 2.5 percent. 2,473 (Friday: 1,957) price winners and 830 (1,340) losers were seen. 96 (123) titles closed unchanged. The US stock market was closed on Monday for the Juneteenth holiday.
Little has changed in terms of the market-determining issues. A volatile environment is therefore likely to continue. Investors continue to focus on high inflation and the US Federal Reserve’s rapid turnaround in monetary policy. Concerns about a possible recession also persist.
US President Joe Biden, meanwhile, sees a recession in the US as “not inevitable”. “No, I don’t think so,” Biden said after speaking with former Treasury Secretary Larry Summers when asked whether the US was headed for a recession. Goldman Sachs economists see only a 30 percent chance that the US economy will slide into recession in 2023, up from a 15 percent previous estimate.
The President of the Federal Reserve Bank of St. Louis, James Bullard, believes that the US economy will continue to grow this year and that the Federal Reserve will have to meet market expectations for interest rate hikes in order to curb inflation. “US labor markets remain resilient and production is expected to continue to expand through the end of 2022,” Bullard said. However, he added: “Risks remain significant, stemming from uncertainty surrounding the Russia-Ukraine war and the possibility of a sharp slowdown in China.”
Euro firmer – oil prices rise
On the foreign exchange market Euro up 0.2 percent to $1.0529. Speculation that the ECB will find a suitable instrument to prevent a widening of the yield spreads (fragmentation) on government bonds of more indebted countries should have provided tailwind. As Governing Council member Francois Villeroy de Galhau stressed in an interview with the Corriere della Sera newspaper, it has to be big enough to impress the markets.
Oil prices rose somewhat. The price for the barrel of the variety STI increased by 0.9 percent, the Brent-Price was 0.4 percent firmer. Recent Chinese data showing record oil imports in May suggested demand remains strong, noted Oanda market strategist Jeffrey Halley.
Quotations on the bond market fell. The papers were not in demand in the risk-taking environment. The yield on ten-year paper rose accordingly by 6.8 basis points to 3.30 percent.
Jetblue gave way 1.6 percent. The bidding war for the US low-cost airline Spirit Airlines is entering the next round. Jetblue Airways has upped its bid and said it will divest parts of the company in order to get antitrust approval for a deal. Jetblue is now offering $33.50 cash per Spirit share, up $2 from what it was previously offering. the Spiritshares gained 7.9 percent. The company is now faced with the decision to accept the offer jet blue accept or continue the planned acquisition by Frontier Airlines (+1.6 percent).
Kellogg wins thanks to split plans
Kellogg gained 2 percent after the food company decided to split into three independent companies. The US snack and food company Mondelez (+1.7 percent) strengthened with a multi-billion acquisition. As the group announced, it is taking over the non-listed energy bar manufacturer Cliff Bar for at least $2.9 billion.
TeslaCEO Elon Musk wants to cut 10 percent of the jobs at the electric car pioneer within about the next three months. The share rose by 9.4 percent.
DaVita lost 15 percent after the dialysis company suffered defeat in the United States Supreme Court. It was about the assumption of costs for outpatient dialysis.