The U.S. stock market at the close of the week tried to balance yesterday’s sell-off and Friday’s attempted rebound. As a result, all major benchmarks ended the week with negative results, with the S&P 500 Index +0.22%, while posting its worst week since 2020, losing 5.8% during that trading stretch.
The Dow Jones index -0.13% ended trading below the 30,000-point psychological level for the second day in a row, returning to January 2021 levels. The weekly loss was 4.8%. The composite Nasdaq gained 1.43% in the session, but the five-day results were just as bad as those of the Dow Jones.
Oil squeezed oil stocks
Amid concerns about weakening demand due to the expected slowdown in the US and European economies the American benchmark WTI lost over 7% and the North Sea Brent over 5%. A significant drop in oil quotations still pushed energy sector securities to a corrective peak.
Traders on NYSE discuss potential of Dow Jones falling / Photo: Reuters
Oil companies that showed examples of firmness and stability during the current correction were among the leaders of the fall. Oil giant Chevron (CVX) -4.56% “led” the Dow Jones, while ConocoPhillips (COP) -8.47%, Devon Energy (DVN) -8.3% and Pioneer Natural Resources (PXD) -8.17% ruled the bear ball in the S&P.
Shares of ExxonMobil (XOM), the largest U.S. oil and gas corporation by capitalization, fell 5.77%. On the European stock markets the situation is similar. BP (BP) -6.17% became the major negative market performer in London, while Total Energies (TTE) -5.06% and Eni (ENI) in Paris and Milan, respectively.
Accumulated “fat” so far saves
red fat point set in Friday’s trading, the bulk of the sector’s securities have a significant margin of safety accumulated over the first half of the year. At the moment, Exxon has more than 35% and Chevron 24%. Smaller-cap stocks are adding even more. For example, Occidental Petroleum (OXY) stock is up nearly 80% since the beginning of 2022. Here’s how it looks on the chart.
Occidental Petroleum (OXY) stock chart on the NYSE. Source: NYSE
The chairman of the U.S. Federal Reserve is just getting ready to speak on Capitol Hill next week, and economists and stock strategists at major financial houses are already posting their evaluative judgments on the central bank’s ability to make a soft landing
Inflation and the U.S. economy
JPMorgan economists are optimistic that Jerome Powell can succeed in finding a balance between inflation and growth in the U.S. economy. At the same time they do not deny with 63% probability the recession in the U.S. economy within the next two years. And more than 80% give that it will come within three years.
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Bank of America’s strategists say the worst fears are confirmed and against this background they expect U.S. GDP growth to slow to almost zero, inflation to three percent and interest rates to rise as much as four percent.
In this regard, they recommend that investors stop fighting with the Fed and refuse to buy spills on stocks. In the current situation, they consider “cowardice” to be the most important quality when building an investment portfolio. “Courage is not appropriate – heroism in a bear market is punishable,” CNBC quoted the bank’s findings as saying.
The attention of traders and investors will be riveted to the University of Michigan’s consumer sentiment data this coming Friday. Given the recent inflation data, which was the basis for a 75 basis point rate hike, this statistic becomes more important.
By topic: Economic calendar of macrostatistics
The preliminary consensus projection hints at another negative record, and if confirmed, that would be a strong reason for the regulator to be even more aggressive.
Next week will be a shortened week in the U.S. stock market. The exchanges will be closed on Juneteenth, the day of the abolition of slavery, or as it is also called Freedom Day. Lincoln banned slavery in Texas and other states, and General Gordon Granger announced the order on June 19, 1865, but only last year Joseph Biden made the event a federal holiday on June 17.
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