Wall Street, Powell doesn't rule out hard landing.
The S&P 500 index is close to ending the first six months of 2022 with a drop of about 20%, reporting its worst half-year loss since 1970, when it experienced a decline of -21.01%.
Instead, looking at the quarterly trend, both the Dow Jones and the S&P 500 are going to report in the second quarter of 2022 the worst performance since 2020, that is, from the period to which the beginning of the Covid pandemic is traced.
The Nasdaq, down more than -20% in the second quarter, is aiming to end its worst quarter since 2008.
“The jump in inflation, the Fed's monetary policy transition (to an approach always more hawkish) stock ratings historically high were all factors, including investors, they thought while the year was starting," commented John Lynch, chief investment officer of Comerica Wealth Management, as CNBC reports – A combination of lockdown anti-Covid-19 in China and the incursions into Ukraine by Russia have led to an escalation of further volatility, as investors have become more and more worried about the possibility of a global recession over the next year.”
Yesterday, at the close, contrasting to the US bag, the Dow Jones Industrial Average rose by 82.32 points, (+0.27%), at 31.029,31 points; the S&P 500 plate with a drop of 0.07% to 3.818.83, and the Nasdaq Composite-it is also in plaster, with a change of -0.03% at 11.177,89 points.
The fact that Fed Chairman Jerome Powell yesterday in Sintra, Portugal, at a forum of central banks organized by the ECB, again admitted that he could not rule out a hard landing, so the arrival of a recession further depresses the markets. “Of course, there is a risk of going too far in our fight against inflation," the central banker said. The Fomc, the monetary policy arm of the Fed, will meet on July 26 next year to announce its decision on rates on July 27.
Yesterday, Loretta Mester, chairman of the Federal Reserve Bank of Cleveland and a voting member of the FOMC, said she supports another 75 basis point increase in US rates at the upcoming meeting in July. The Fed raised rates earlier this month by 75 basis points, which was the strongest monetary policy tightening since 1994, to beat US inflation to a record level in the last 40 years.
“If conditions remained the same as today, at the next meeting I would be in favor of raising the rate by 75 basis points, because I have not yet seen these inflation indicators necessary to be able to return to the compression of 50 basis points,” said Mester, interviewed by CNBC.
The fear of a recession is also evident in the US Treasury market, which has been the subject of purchases in recent days after the impact of previous weeks. More than serving inflation, discount rates have been hard landing, since those decades, which have been going down by 3.06%, in anticipation of the dissemination of some data, like this parameter favorite of the Fed in order to track its own inflation rate, or the PCE core index, dissemination along with data on consumption expenditures and personal income. We are also waiting for initial applications for unemployment benefits related to the week ended June 18. Both data will be published at 14.30 Italian time.