04.07.2022
Chicago 11, Melborne City, USA
Investments

Dow Jones kept Jerome Powell’s rhetoric from collapsing. Shares of the strongest sector of the year are under pressure again

4 min 48

The US stock market failed to gain a foothold in positive territory and ended trading on Wednesday, June 22 with minor negative changes. At the same time, the market managed to completely neutralize the negative moods of futures for major indices during the European session.

As a result, the main US stock benchmark Dow Jones Industrial loses 0.15%, the Nasdaq technology sector health indicator ends trading with similar indicators, and the S&P 500 broad market index is in the red by thirteen hundredths.

Investors who were waiting for new comments on the economic condition of the United States from the head of the Federal Reserve received their own. It was the confident rhetoric of Jerome Powell that did not allow the US stock exchanges to close in a deaf minus, in which the futures market was before the opening of the main trades.

Jerome Powell supported the US stock market

Chairman Fed once again confirmed the firmness of its intentions to completely curb the record inflation over the past four decades. The regulator is ready to continue to maintain a tight monetary policy until it sees “convincing evidence that it is on the decline.”

Jerome Powell saved Dow Jones, but traders need more powerful drivers for growth. Photo: Yandex

At the same time, he was forced to admit that achieving a so-called soft landing for the economy without a recession has become “a much more difficult task.” The Powell Office raised rates by 75 percentage points last week and hinted at another similar monetary round at its next meeting.

This finally convinced investors that the Fed was sacrificing the fight to prevent a recession in favor of the battle against inflation. In this regard, recessionary expectations of economists at leading banks and investment houses have skyrocketed in recent days and continue to increase.

Citigroup strategists raised their expectations of the probability of a recession to 50%, while Goldman Sachs cut its forecasts for US GDP in this regard. At the same time, they live quite well, long live the lovers of unbridled optimism. For example, the bankers of the Swiss UBS do not expect either a global recession or its manifestation in the United States economy. Where is the exposure!

Pharmacists in the lead Dow Jones

The main demand fell on the shares of pharmacists and biotechnologists. UnitedHealth (UTH) +1.95%, Johnson & Johnson (JNJ) +1.57%, Procter & Gamble (PG) +1.56%, McDonalds (MCD) +1.44% and Merck (MRK) + 1.28% were in the lead in DJI. While heavy construction equipment manufacturer Caterpillar (CAT) -4.349% and oil and gas giant Chevron (CVX) – 4.347% became outsiders of the trading session.

On the Nasdaq, Moderna (MRNA) was positive, up 4.68%. A noteworthy note came out regarding this runoff on Motley Fool. In the article, the author unequivocally hints at the harmfulness of purchases, as well as averaging positions in heavily declining securities.

The fact that he recalls Buffett’s advice is not bad, but why he chose this particular biotech stock for this example is not entirely clear to me. Especially against the background of the fact that Moderna has technically “trodden” a triple bottom on the semi-annual chart, and is potentially ready to go into a rollback. And given the worked downside of 75%, it can turn out to be quite effective.

Volatile “saw” continues in the oil industry

Volatile slides continue in oil stocks. It all started last week, when oil and gas stocks still gave way, and against the backdrop of falling oil prices, they corrected significantly.

On Tuesday, after a rollback in black gold, oil stocks were among the growth leaders, and on Wednesday, the energy sector, following oil, again knocked out in the worst performer within the S&P index with a result of minus 4.2%. Shares of the largest representative of the oil business in the US ExxonMobil (XOM) fell by 3.96%, Chevron (CVX) lost 4.35% of its capitalization, while papers ConocoPhillips (COP) and EOG Resources (EOG) collapsed by almost 6%.

On Wednesday, US President Joe Biden launched his campaign to save Americans from a catastrophic rise in motor fuel prices. He tabled in Congress a suspension of the federal gasoline tax for three months.

It doesn’t matter if American legislators ultimately support his proposal – this may not happen due to the ambiguous position in the Republican camp, however, he will be able to score at least some political points on the eve of the US elections.

On June 23, the focus of this issue will shift to the meeting of the head of the US Department of Energy Jennifer Granholm with the heads of oil refining corporations, after which the final statements of the parties are quite likely, the results of which will guide investors in energy papers.

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