US Equities Open With Gains On Powell’s Remarks

US stocks indices recover some ground after registering minimal losses on Wednesday. The S&P Global PMIs indices missed expectations, dragging equities lower.

US equities opened in the green territory as Wall Street began within familiar ranges, though S&P Global PMIs where the three indices missed expectations, stocks seesawed and pullback from daily highs, but resumed the upward recovery.

The S&P 500 has regained composure, rising 0.53%, up at 3,777.04, though shy of Wednesday highs around 3800. Meanwhile, the tech-heavy index, the Nasdaq 100, again leads the pack to the upside, gaining 0.90%, up at 11,151.78, followed by the Dow Jones Industrial (DJIA) climbing 0.37%, advancing 30,595.05

On Thursday, the S&P Global PMIs for the US missed expectations, showing that business activity in the manufacturing and services sector is expanding but at a weaker pace after sliding to 52.4 from 57 (Mfg.) and 51.6 from 53.4 (Services), with the latter readings in May. In the meantime, US Federal Reserve Chair Jerome Powell speaks at the US Congress for the second consecutive day.

In the broader market index, the leading sectors are Consumer Staples, up by 1.60%, followed by Utilities, and Health, each recording gains of 1.148% and 1.46%, respectively. In negative territory stays commodity-related sectors like Energy, Materials, and Industrials, dropping by 1.12 %, 0.75%, and 0.68% each.

The US Dollar has recovered some territory and edges towards 104.374, up by 0.18%. Meanwhile, US Treasury yields remain on the defensive, with the US 10-year Treasury yield tumbling 14 bps, yielding 3.018%, retreating from weekly highs near 3.317%.

The Fed Board Governor Michelle Bowman stated that another 75 bps rate hike in July would be appropriate, followed by at least 50 bps at next subsequent meetings.

In the commodities complex, the US crude oil benchmark, WTI, slides 0.75%, exchanging hands at $105.47 BPD. At the same time, precious metals like gold (XAU/USD) rise 0.23%, trading at $1842.70 a troy ounce.

Defensive stocks are leading Wall Street higher amid accelerating recession fears. US main indexes rose on Thursday as investors turned to consumer staples and healthcare companies to mitigate their risks if the economy falls into recession.

Following the largest interest rate hike by the Federal Reserve in nearly three decades, investors fear economic growth and corporate profits could come under pressure, with the Ukraine war and the supply chain problems adding to the woes.

Big Wall Street banks including Citigroup (C.N) and Goldman Sachs (GS.N) now see a bigger chance of a recession. Healthcare (.SPXHC), consumer staples (.SPLRCS), real estate (.SPLRCR) and utilities (.SPLRCU) – sectors considered as safer bets within equities – rose more than 1% each.

The S&P 500 (.SPX) confirmed last week it has been in a bear market, clocking a 20% loss from its January closing peak. The tech-heavy Nasdaq (.IXIC) has shed more than 30% from its November peak. This is a bit of a relief rally… you could call it a dead cat bounce or a bear trap. There is more room to the downside and much more downside risk.

A survey released earlier showed US business activity slowed considerably in June as high inflation and declining consumer confidence dampened demand, resulting in a gauge of new orders contracting for the first time in nearly two years.

Another set of data showed the number of Americans filing new claims for unemployment benefits hovered near a five-month high. Investors are also keeping an eye on comments from Fed Chair Jerome Powell, who is testifying before the House Financial Services Committee. He said on Wednesday the US central bank is not trying to engineer a recession but is committed to bringing prices under control even if doing so risks an economic downturn.

Money markets are pricing in 75 basis point increase in rates next month, followed by a 50 basis point rise in September. The Dow Jones Industrial Average was up 61.59 points, or 0.20%, at 30,544.72, the S&P 500 was up 10.48 points, or 0.28%, at 3,770.37, and the Nasdaq Composite was up 50.22 points, or 0.45%, at 11,103.30.