On Monday, the 10-year Treasury yield hit its highest level in nearly a month as investors began to sell bonds. Despite this new high, the markets did not flinch. “I think the shock has worn off of piercing that 3% level for the 10 years. We’ve been there before, and we came back,” said Wayne Wicker, chief investment officer at MissionSquare Retirement. “While certainly interest rates moving up is something that equity guys don’t like, it’s somewhat of a foregone conclusion that we’re going to see higher rates in the near term. The question is, has the bond market has priced a lot of that in yet.”
Amazon gained 2% on Monday, the official day of the division by twenty of its stock, which has become more accessible to small investors. Twitter (-1.49%) once again suffered from Elon Musk’s latest remarks, which continues to demand more information from the company on spam and fake accounts, even threatening to withdraw its offer. The entrepreneur is looking for means of pressure “in order to lower the price of the offer or completely withdraw if he decides to do so,” suggests Angelo Zino of the company CFRA.
Target’s stock took a beating on Tuesday following the company’s announcement that it would have to adopt a series of measures to get rid of products and thus reduce its inventories. This will certainly reduce its profitability in the coming quarters. “The problem is that consumer habits have changed, causing problems for Target in certain categories where inventory has ballooned far too much due to poor forecasts and supply chain disruptions,” said Neil Saunders of consultancy GlobalData.
In fact, consumer habits have changed since the end of the pandemic and many retailers are struggling with a surplus of products that no longer finds a buyer. Clients were shopping for pajamas and leggings at the beginning of the pandemic and now want to buy suitcases and swimsuits. Its stock has already fallen 31% since the start of the year and ended the session down 2.31%. The retail sector was hurt by the news on Tuesday, stocks like Walmart (-1.20%) and Best Buy (-1.16%) were down.
“It was a bit harsh to punish the market twice for Target,” explained Jack Ablin, of Cresset Capital, recalling that barely three weeks ago, the distributor from Minneapolis (Minnesota) had already weighed down Wall Street with results below expectations.
For their part, the indexes closed Tuesday session up; the Dow advanced by 0.80%, the NASDAQ gained 0.94% and the S&P 500 by 0.95%. Markets started the session lower, hit by Target 7% decline early in the day, but investors continued to buy stocks on sale. “Despite the gloom, some investors find equities attractive as it looks like the United States will not enter a recession this year or next,” Edward Moya, D. ’Oanda.
Kohl’s stock racked up gains of more than 9% after The Wall Street Journal reported news that the chain is in talks with Franchise Group to buy the company for $60 a share.
The energy sector was among the big winners on Tuesday session as the price of Brent hovered around $122. The sector has accumulated gains of 65% this year “Investors are concerned with where energy prices are headed. All you’re seeing is people rearranging some positions and to some extent waiting for a better indication that perhaps inflation will come off in recent times,” said Rick Meckler, a partner at Cherry Lane Investments. “You are just going to see more choppiness, there isn’t really any breakthrough news in the market, both in terms of earnings and economics.”
All three major US indexes ended Wednesday session lower as Treasury yields rose above the psychologically important 3% level, followed by a rise in the price of a barrel of oil. The Dow ended the session down 0.81%, the NASDAQ fell 0.73 while the S&P 500 lost 1.08%.
Investors were still awaiting Friday consumer price index report for May. “We believe equity markets would likely rally at any hint of a pause in the expected rate-hike cycle. Positive consumer data could also help relieve some growth fears but, in some circumstances, could also further concern that the Fed needs to get more aggressive to cool demand,” Wells Fargo strategist Scott Wren said in a note to clients. “The stock market rallies at this point will likely see headwinds and not meaningful follow through until there are clear signs the Fed is succeeding in controlling inflation,” Wren added.
Markets ended Thursday’s session lower as investors eagerly awaited the inflation report published on Friday. The Dow ended down 1.94%, the S&P 500 2.38% and the NASDAQ 2.75%, dragged down by shares of Apple (-3.6%), Meta (- 6.4%) and Amazon (-4.2%).
“Primarily, we are seeing a prelude to inflation data for Friday which is really making the market nervous,” said Peter Cardillo of Spartan Capital Securities. “The other nervous factor comes from the European Central Bank (ECB), which plans to raise rates by a quarter of a point in July, stop its asset purchases and probably operate a further hike of 50 basis points in September,” said Mr. Cardillo.
The three main indexes fell on Friday after the publication of the consumer price index (CPI) in the United States up 1% in May, its highest level since 1981. The Dow lost 500 points, the S&P 500 was down 1.5%, while the NASDAQ lost 1.7%.
World Bank
The World Bank has lowered its growth forecast for 2022, due to the war in Ukraine, the recent confinement in China and the risks of “stagflation.” According to the Larousse definition, stagflation is an “economic situation where the slowdown in growth, sometimes recession, is accompanied by a rise in prices and wages.”
“The world economy is again in danger,” President David Malpass said in the foreword of the latest edition of the lender’s Global Economic Prospects report released Tuesday. “It is facing high inflation and slow growth at the same time. Even if a global recession is averted, the pain of stagflation could persist for several years — unless major supply increases are set in motion.”
The effects of stagflation will be even more difficult for countries with more fragile economies “About 60 per cent of the world’s 75 poorest countries are in or at risk of debt distress, and this is spreading to middle-income countries,” Malpass said in an interview on Bloomberg Television. “There’s a severe risk of malnutrition and of deepening hunger and even of famine,” Malpass warned.
In its report, the World Bank lowered its forecasts for many countries, including the world’s two largest economies. First for the United States, the Bank cut its growth forecast to 2.5%, from 5.7% in 2021 and from the 3.7% it had forecast in January. For China, the Bank estimates that its growth will slow to 4.3% against 8.1% last year. The confinement of the last few months in China has greatly affected its economic activity. “In the short term, China faces the dual challenge of finding a happy medium between easing health measures and supporting growth,” said Martin Raiser, China-Mongolia-Korea manager at the World Bank.
The Bank believes that the health measures applied in China risk "further delaying the recovery of consumption and services, discouraging private investment, disrupting trade flows and (ultimately) reducing growth," the Bank summarizes in a China-specific report.
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