The long weekend clearly benefited investors, who experienced their biggest weekly loss in the broad market index since March 2020 the day before.
The Dow Jones has resurfaced from under 30,000
Having rethought the Federal Reserve’s aggressive policies and the increasing chances of a recession in the U.S. economy, market participants began to generate a rebound in all major stock indexes. The 27 components of the Dow Jones and 441 shares of the S&P 500 ended trading with an increase in capitalization.
Jerome Powell hopes to curb inflation and save the Dow Jones. Photo: NewYorker.com
Shares of UnitedHealth (UNH) +6.25%, Chevron (CVX) +4.18% and Merck (MRK) +4.03% helped the Dow Jones index not only climb 2.15% in late trading but also close well above the 30000 psychological level. The demand for Big Tech was realized in shares of Alphabet (GOOG) +3.85%, Apple (AAPL) +3.28%, Microsoft (MSFT) +2.46% and Amazon (AMZN) +2.32%.
Elon Musk clarified on cuts at Tesla
Tesla (TSLA) was the leader in the S&P 500 +2.45% and Nasdaq +2.51%. Elon Musk decried his previous statements regarding the car company’s 10% staff cuts over the next three months. He added that amid these layoffs, Tesla would continue to hire employees on an hourly schedule.
In the end, this combination would result in an overall reduction of no more than 3.5%. Moreover, a year from now, Musk expects the number of employees at TSLA to be higher than it is at the moment. Despite a significant gain of 9.35% during the day, Tesla stock is more than 30% away from its highs seen earlier this year.
Demand has returned to oil and gas
Oil prices, which since yesterday have been showing local stability, have returned investment confidence to the oil sector. West Texas Intermediate (WTI) rose 1.5 percent to nearly $110 a barrel. North Sea Brent, which added less than a percent, lacked a few cents to occupy the $115 price tag.
Against this backdrop, oil and gas securities were the best sector Tuesday. Shares of ExxonMobil (XOM), the largest U.S. oil company by capitalization, gained 6.22% at once. A Credit Suisse upgrade on them also came just in time.
The focus is on John Rockefeller’s former company
The Swiss bank raised its recommendation on the Texas-based company to “above market” with an upside of 45% from current levels based on XOM’s divergence strategy to capitalize on the current rise in the price of black gold
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Diamondback Energy (FANG) shares were the leaders, up more than 8%, on the back of a renewed capital return program to at least three-quarters free cash flow. ConocoPhillips (COP) shares gained nearly 6%. Oil service giants Schlumberger (SLB) and Halliburton (HLB) had similar numbers.
Jerome Powell Goes to Congress
On Wednesday and Thursday, Fed Chairman Jerome Powell will address Congress during which he is likely to come under pressure from U.S. lawmakers amid his agency’s actions to fight inflation. Public fears about the near-term outlook for the U.S. economy have been steadily growing.
Bank of America economists see a 40% chance of a recession. At the same time, they specify that the Fed has fallen far behind schedule and is now playing a dangerous game of catch-up. The basic scenario of the Deutsche Bank of Germany is more categorical and suggests the beginning of recession in the third quarter of 2023, while strategists of Goldman Sachs consider the possibility of its occurrence at 30%.
The
stock market outlook remains bearish
All of the above makes the U.S. stock market more and more vulnerable and allows it to fall further even despite the already held 22% cliff from the highs
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Fears of a slowdown in global economic growth will gradually supplant inflation as the main focus of investors, according to analysts at Credit Suisse. This tendency already starts to show itself through deterioration of a situation with commodities and especially industrial metals.
For this reason investment strategists of CFRA Research see in local movement of the market not a turn but rebound. In their opinion the market lacks for the full picture of the main detail – complete capitulation of positions with total sale based on fear of what is happening. They expect a decline in the S&P 500 Index to the 3200 level or 30% from the highs before any recovery can be counted on.
On topic: Comparing the length and breadth of previous bear markets since 1973