Stocks Hang on to Gains, But Remain Choppy…..

Unlike yesterday, U.S. stocks battled back from some early afternoon softness and managed to finish solidly in the green. The markets showed some resiliency in the face of growing recession concerns as Fed Chairman Jerome Powell maintained his stance that aggressive monetary policy will continue until price stability is restored. However, the action in the other markets suggested uneasiness remains as Treasuries rose and yields continued to fall, the U.S. dollar rebounded, and crude oil prices extended a recent drawdown. The economic calendar did little to alleviate recession worries as jobless claims moderated by a smaller amount than expected, and June manufacturing and services output both slowed more than expected and moved closer to exiting expansion territory. In equity news, KB Home topped earnings estimates, while Darden Restaurants issued a mixed outlook, and Accenture offered disappointing guidance. Asia finished mostly higher, and Europe traded lower, with the global markets grappling with the recession concerns and digesting manufacturing and services sector reports around the world.

The Dow Jones Industrial Average rose 194 points (0.6%) to 30,677, the S&P 500 Index gained 36 points (1.0%) to 3,796, and the Nasdaq Composite advanced 179 points (1.6%) to 11,232. In moderate volume, 5.0 billion shares of NYSE-listed stocks were traded, and 5.2 billion shares changed hands on the Nasdaq. WTI crude oil fell $1.92 to $104.27 per barrel. Elsewhere, the gold spot price decreased $10.60 to $1,827.80 per ounce, and the Dollar Index rose 0.2% to 104.36.

Weekly initial jobless claims came in at a level of 229,000 for the week ended June 18, versus the Bloomberg consensus estimate calling for 226,000, and versus the prior week’s upwardly-revised 231,000 level. The four-week moving average rose by 4,500 to 223,500, and continuing claims for the week ended June 11 increased 5,000 to 1,315,000, versus estimates of 1,320,000. The four-week moving average of continuing claims declined by 7,000 to 1,310,000.

The preliminary S&P Global U.S. Manufacturing PMI Index for June declined to 52.4 from May’s unrevised 57.0 figure, and versus estimates of a slight decrease to 56.0. The preliminary S&P Global U.S. Services PMI Index showed growth for the key U.S. sector in June also slowed more than expected to 51.6, compared to expectations of a dip to 53.3 from May’s 53.4 figure. However, growth remained as readings above 50 for both indexes denote expansion.

S&P Global said June was the weakest upturn in U.S. private sector output since January’s Omicron-induced slowdown. The report said slower service sector output was accompanied by the first contraction in manufacturing production in two years.

In other manufacturing news, the June Kansas City Fed Manufacturing Activity Index slowed by a smaller amount than expected and remained in expansion territory (a reading above zero). The index decreased to 12 from May’s unrevised 23 reading, compared to forecasts calling for a decline to 10.

Treasuries rose with yields losing ground as concerns continue to climb regarding a recession amid the backdrop of an aggressive Fed to try to combat persistent inflation. The markets also continue to digest this week’s Congressional testimony from Fed Chairman Jerome Powell. Powell stated restoring price stability is the Fed’s number one priority and that ongoing rate hikes will be appropriate to achieve that. Powell did note that the economy is very strong and well positioned to handle tighter monetary policy. He added that the labor market is “extremely tight” and the Fed’s tightening measures are aimed at job market balance, while saying the tightening of financial conditions seen in recent months should continue to temper growth and help bring demand into better balance with supply. He did concede that rate hikes could provoke a recession, and a soft landing will be “very challenging” given the global climate.

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