The 2-year treasury bond index jumped over the 10-year treasury bonds as recession concerns rose more than ever.
Over the past few weeks, investors’ fears have grown significantly due to the low gains and the significant loss that Wall Street took. On top of that the past week the Atlanta GDP bank forecast about the second quarter, the bank believes that the U.S GDP will decline 2% by the end of the second half.
The Federal Reserve’s plan is to tame inflation and improve growth, but unfortunately, inflation is winning this last round. It’s like the 2019 scenario when the market recession fears grew, but the FED acted fast. The question that everyone asks now is, will the Federal Reserve be capable of taming this year’s inflation, or is it too late? Part of the central bank’s plan is to increase interest rates and decrease their bond purchasing power. That means multiple aggressive interest hikes, resulting in 7-9 interest rates. Goldman Sachs believes that by the end of 2023, the Federal Reserve will have increased its interest rates 18 times, which adds fuel to the inflation pressures.
The 10 years treasury yield declined by 3.27% to 2.809. The S&P 500 had cut some losses and dropped by 0.14%, the Nasdaq composite had fallen by 1.31%, and the Dow Jones had dropped by 0.69%. But what worries inventors more is the fact that the 2-year treasury bonds are higher than the 10-year treasury bonds.
Economically speaking, the two indexes work as a greater indicator of a recession. When the 2-year Treasury bond is slightly higher than the 10-year Treasury bond, that is usually a recession sign.
Hours after the data release, Brent oil fell by 9%, and gas prices fell as well, posting losses in the energy sector. However, not all news is negative; the U.S dollar is gaining momentum and making gains this week. The euro is 1.57% down compared to the US dollar, and the U.S dollar is up by 0.06% against the Japanese yuan.
Raising interest rates had a major effect on tech stocks, and energy stocks as well. However, mega tech stocks ended today’s session positively. TSLA rose by 2.55%, Microsoft Corporation climbed by 1.26%, and Meta gained 5.10%. Even though tech stocks are at their lowest level in this first half,
As for the Bank of America stock today, it fell by 1.01% due to rising recession concerns and doubts about the Federal Reserve’s ability to shrink inflation.
By next week, the second-quarter results will be released. According to the previous forecast, the revenues will be low compared to last year’s second quarter results. JP Morgan will release its second-quarter report on July 17th. Furthermore, the Federal Reserve is expected to raise interest rates and act aggressively at its next meeting.
The bottom line, in terms of how the market will move in the next few weeks, is that it is uncertain, especially when the growth and inflation fight is still on.