Thomas Lyons 
Investors are weighing concerns about whether the US is heading into a recession as stock markets show mixed results. While data showed that US initial jobless claims reached the highest since October 2021, producer prices rose by less than expected in April. These figures signal that rate hikes by the US Federal Reserve may finally be having an effect on inflation as the central bank walks a tightrope between reining in rising prices and tipping the economy into a downturn.
Don Rissmiller, chief economist at Strategas, believes that “inflation has peaked and is trending lower as growth weakens.” The data supports the case that the US Fed will pause hiking rates, he said, though there are other risks. “While the US does not appear to be in recession right now, there are some signs of cracks starting to appear, and global pressures remain,” he said.
Financial markets are pricing in more than 75 basis points of cuts in US interest rates in 2023 after this week’s economic reports. “Today’s data is a step in the right direction from the Fed’s perspective,” said Kara Murphy, chief investment officer of Kestra Investment Management. Economic indicators are “moving in the right direction, but none of it is enough to say that the Fed’s job is done,” she added.
The S&P 500 index fell after the data signaled a cooling jobs market and price inflation. However, the Nasdaq 100 index edged higher, with Google-owner Alphabet bolstering the tech-heavy benchmark after it showcased its artificial intelligence tools. Disney shares dropped by 8.5% after losing streaming service subscribers, and Peloton shares slid after recalling 2.2m exercise bikes. Sentiment seemed fragile, with investors still worried about the US debt-ceiling and stability of the banking industry. PacWest was the worst performing regional lender after deposits fell last week.
The US Federal Reserve is currently walking a tightrope to balance the economy’s growth while reining in rising prices. The latest economic data shows that the US initial jobless claims reached the highest since October 2021, while producer prices rose by less than expected in April. This data indicates that the rate hikes by the US Federal Reserve may finally be having an effect on inflation.
Don Rissmiller, chief economist at Strategas, believes that inflation has peaked and is trending lower as growth weakens. He also said that the data supports the case that the US Fed will pause hiking rates, although there are other risks. While the US does not appear to be in recession right now, there are some signs of cracks starting to appear, and global pressures remain.
Financial markets are pricing in more than 75 basis points of cuts in US interest rates in 2023 after this week’s economic reports. Kara Murphy, chief investment officer of Kestra Investment Management, said that today’s data is a step in the right direction from the Fed’s perspective. Economic indicators are moving in the right direction, but none of it is enough to say that the Fed’s job is done.
The S&P 500 index fell after the data signaled a cooling jobs market and price inflation. On the other hand, the Nasdaq 100 index edged higher, with Google-owner Alphabet bolstering the tech-heavy benchmark after it showcased its artificial intelligence tools. Disney shares dropped by 8.5% after losing streaming service subscribers, and Peloton shares slid after recalling 2.2m exercise bikes.
Sentiment seemed fragile, with investors still worried about the US debt-ceiling and stability of the banking industry. PacWest was the worst performing regional lender after deposits fell last week. While the economic indicators are moving in the right direction, investors are still cautious about the future of the US economy.
