Wall Street Displays Mixed Reactions Amid Concerns Over the Chinese Economic Downturn
The S&P 500 benchmark and Nasdaq head to close the week with a low session; both indexes fell on Friday’s trading session. The Fed still stands up and sends suggestions that interest rate hikes will continue.
As of 14:40 a.m. NY, the S&P 500 benchmark was down by 0.15% to 4.363.6 bps, while the Nasdaq fell by 0.4% to 13.268.33 bps. Likely for Wall Street, the Dow future was such a savior for the stock market that, despite the negative session, it managed to remain relatively above 0%. The futures added 0.08% this session, heading to close the week with a high session.
The mixed earnings for Wall Street were due to three main components: the negative news about the second largest economy, the increasing 30-year bonds, and the Fed’s stand against inflation.
In terms of the first subject, China’s economy is going through some difficult challenges, particularly in the construction and real estate sectors. Construction, a pillar of the nation’s gross domestic product (GDP), constitutes up to a quarter of it. However, tremors from the real estate sector are sending shockwaves through confidence, raising concerns about potential repercussions for the broader economy. Plummeting housing sales, declining prices, and reduced investments compound the worries. Worse yet, a looming deflationary cycle threatens to exacerbate the predicament, posing a substantial threat to a nation that recently emerged from three years of stringent zero-COVID measures. The intricacies of this situation underscore the delicate balancing act China faces as it grapples with interconnected economic dynamics. Meanwhile, the Chinese central bank paused all attempts to support its currency due to the latest series of economic data. On the other hand, the U.S. dollar isn’t doing as well. The global currency swings up and down with gains and losses, which paints a picture of an uncertain global economy and supply.
In other economic news, 30-year fixed-rate mortgages topped 7% this week, according to the Freddie Mac Primary Mortgage Survey, marking the highest level seen in more than 20 years. According to Sam Khater, chief economist at Freddie Mac, low inventories are the main reason for stalling home sales despite affordable prices. He added, “The economy continues to do better than expected, and the 10-year Treasury yield (US10Y) has moved up, causing mortgage rates to climb.” In the past three days, the bond market has been rising at a faster pace to reach its highest level in the past 16 years. The 10-year bond market reached its highest level since 2008. As for today’s session, the 10-year Treasury Yield displayed a decrease of 8 basis points, settling at 4.23%. These fluctuations underscore the varied trends and sentiments shaping global financial markets.
As for the global market, In Asian markets, Japan dipped by 0.6%, Hong Kong experienced a sharper decline of 2.1%, China saw a 1% drop, and India’s losses were comparatively milder at 0.3%. Moving over to Europe, as of midday, London exhibited a decrease of 0.8%; Paris followed suit with a similar drop of 0.8%; and Frankfurt’s decline was slightly smaller at 0.7%. Simultaneously,