Dow was up 175, advancers over decliners 4-3 & NAZ went up 48. The MLP index was little changed in the 209s & the REIT index added 2+ to 420. Junk bond funds were mixed & Treasuries are being purchased, reducing yields. Oil crawled higher in the 97s & gold jumped 33 to 1770.
AMJ (Alerian MLP index tracking fund)
Pres Biden reacted to the GDP report, saying it is "no surprise that the economy is slowing down" amid inflation, despite saying earlier this week that the US would not be entering a recession. The US economy shrank in the spring for Q2, meeting the criteria for a recession as record-high inflation & higher interest rates forced consumers & businesses to pull back on spending. GDP, the broadest measure of goods & services produced across the economy, shrank by 0.9% on an annualized basis in Q2, the Commerce Dept said in its first reading of the data. The forecast expected the report to show the economy had expanded by 0.5%. "Coming off of last year’s historic economic growth – and regaining all the private sector jobs lost during the pandemic crisis – it’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation," Biden added. "But even as we face historic global challenges, we are on the right path and we will come through this transition stronger and more secure." Biden touted the job market, saying it "remains historically strong, with unemployment at 3.6% and more than 1 million jobs created in the second quarter alone." "Consumer spending is continuing to grow." "My economic plan is focused on bringing inflation down, without giving up all the economic gains we have made," Biden noted. "Congress has an historic chance to do that by passing the CHIPS & Science Act & Inflation Reduction Act without delay."
Biden reacts to recession news after saying it wouldn't happen
US gov debt prices rose after the preliminary GDP reading for Q2 showed an economic contraction. The yield on the benchmark 10-year Treasury note slipped by 7 basis points to 2.66% & the 2-year yield fell 9 basis points to 2.879%. Meanwhile, the 30-year Treasury yield moved lower by 2 basis points to 2.975%. Yields move inversely to prices & one basis point is equal to 0.01%. Q2 GDP slipped 0.9%, the Bureau of Economic Analysis said, the 2nd-straight negative qtr for GDP, a metric which has historically often coincided with economic downturns. Though some economists use 2-straight negative quarters of GDP as a shorthand definition for recession, US recessions are officially designated by the National Bureau of Economic Research, which uses a more nuanced definition. Solid job growth during H1 & impact of high imports on GDP, have led some to speculate that the NBER will not declare a recession during the first 2 qtrs of 2022. The market's moves came after the Fed decided to raise interest rates by 75 basis points< for a 2nd month in a row to combat high inflation. Chair Jerome Powell said the central bank will be making rate hike decisions on a meeting-by-meeting basis. In addition, the Fed also said the US economy is not in recession as “there are just too many areas of the economy that are performing too well.” The comments pushed US stocks higher yesterday.
10-year Treasury yield falls after preliminary GDP reading shows negative growth
China’s top leaders signaled that no big stimulus for economic growth was on the way, & downplayed the necessity of achieving the “around 5.5%” GDP target. In H2, authorities said they would stabilize employment & prices. That high-level mention of stabilizing prices indicates there won't likely be any additional expansionary policies, Wang Jun, a director at the China Chief Economist Forum, said. He noted high inflation overseas & expected China would face greater inflationary pressure in the coming months. One of the largest stimulus announcements came in late May when China's State Council, the country's top exec body, announced 33 economic support measures ranging from tax refunds to infrastructure investment. While Wang expected continued use of credit & local gov bonds to support the economy, he said authorities would not likely “force” 5.5% growth. China's GDP grew by just 2.5% in H1 from a year ago, after the economy slumped in Q2. The country's worst Covid-19 outbreak since 2020 locked down the metropolis of Shanghai in Apr & May, while related restrictions in other parts of China hit business activity. However, China's leaders did not signal any change in the country's “dynamic zero-Covid” policy.
China signals no big stimulus is coming, while Covid controls remain
Dow Jones Industrials
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