The minutes of the June FOMC meeting gave investors little cause for relief. U.S. stock indices rose symbolically on this backdrop on Wednesday, July 6.
The Dow Jones added 0.23%
the broad market index S&P 500 and the main market indicator of the US technology sector Nasdaq Composite “weighed up” by 0.36% and 0.35%, respectively. In Big Tech we see growth in Microsoft (MSFT) +1.28%, Alphabet (GOOG) +1.16% and Apple (AAPL) +0.96%. The major indices were helped to close higher by military-industrial leader Northrop Grumman (NOC) +3.77%, pharmaceuticals United Health (UNH) +1.99% and technologists Cisco Systems (CSCO) +1.74%.
In the S&P 500, the weakest performers were the cruise operators lined up under worst performers: Norwegian Cruise Line (NCLH) -9.55%, Royal Caribbean (RCL) -7.19% and Carnival (CCL) -6.82%.
The Fed and the Crusade Against Inflation
According to the minutes, one thing is certain – the Federal Reserve is ready to firmly defend its policy of fighting inflation even if there is a slowdown in the economy that will lead to a recession at stake
. Dow Jones assessed the U.S. Federal Reserve’s determination to beat inflation. Photo: Reuters
It is assumed that the regulator will make another monetary move of 50 to 75 basis points at the meeting on July 26 and 27, writes CNBC. Further action will depend on inflation data, and the Fed’s stance may remain inflexibly tight if they are unsatisfactory from the Central Bank’s perspective.
Bond yields did not fail to continue their upward trajectory. After such rhetoric, investors may well expect a continuation of aggressive policy. Moreover, this is an encouraging signal for stockholders in certain sectors for whom slowing inflation and normalizing the economy is a priority.
Oil continues to worry investors
. Jerome Powell’s office is doing a great job of not just talking about fighting inflation, but showing its monetary warfare in deeds. Some people like it, some people don’t. Judging by the situation in the oil market, holders of black gold futures contracts and investors in oil and gas stocks are in the second group. For the second day in a row, the oil market is shaking pretty badly on the idea of a possible economic slowdown, much less a recession.
West Texas Intermediate (WTI) futures renewed local lows, falling to nearly $95 a barrel. The price of North Sea Brent also broke through the “hundred” and reached $99. Closer to the closing of the session, the aggressiveness of oil bears declined a little, and the oil quotes were able to recover. As a result, West Texas Intermediate closed above $98 a barrel, and Brent was back above $100.
This desperate gloominess of the oil bears couldn’t help but affect energy sector stocks. Chevron (CVX) is again in the negative territory of the Dow Jones, with its stock down 1.32%. ExxonMobil (XOM), the largest U.S. oil company by capitalization, surrendered 1.8%. EOG Resources (EOG) shares, which held above the psychological level of $100, offer an excellent opportunity for investors. Occidental Petroleum (OXY), the strongest oil and gas paper of the year, closed with a neutral 0.00% change in capitalization.
In our previous reviews, we emphasized that the oil companies were not falling as much as one could imagine with oil falling 9% and breaking the psychological level. The situation continues to develop in line with our assumptions. Let’s remind that S&P Energy has almost 30% yield for the year, and oil did not fall to conventional fifty to give up the securities of this sector and make them unpromising.
Besides oil, there is also gas
Moreover, the oil and gas sector is so called because in addition to oil, companies produce natural gas. And the world still has a serious shortage of this fuel – excuse the tautology. And it is especially critical in the European market, whose leaders have decided to play energy independence with Russia.
Literally in less than a month gas prices in Europe have already doubled. As recently as June 7, the price of natural gas quoted at the TTF Netherlands hub was calmly traded in the range of $850-900 per 1,000 cubic meters, while at yesterday’s trading session the blue fuel quotes ignored the successful “ending” of the strike in Norway and rose by an additional 5% to $1828.
Industry analysts are wracking their brains over the next gas forecasts, and more and more often they hear appeals to launch Nord Stream 2 to somehow start saving not only the sinking economy of Germany, but also people who are absolutely seriously preparing for freezing temperatures in their apartments with the coming of autumn and even more so winter weather.
Gas stubbornness could cost the Old World a great deal in the near future, but the oil and gas companies would only benefit from it. And if the “allies” are also smart enough to get involved in the Russian oil price restrictions that are so actively discussed now, it will be harder for Biden to find “affectionate” words for the oil companies.