Stocks Are Steady Ahead of Fed Minutes, and Yield Curve Inversion Flash Recession Warning - 7/6

Stocks Are Steady Ahead of Fed Minutes, and Yield Curve Inversion Flash Recession Warning - 7/6 ...

Updated at 11:33 am EST

As investors monitor bond markets, US equities fell slightly on Wednesday, while global equities remained stable and the dollar reached its highest level in two decades.

As industry activity and output data from major economies across the world slows and inflation pressures continue to increase input costs and squeeze margins, the US dollar index, which benchmarks the greenback against a basket of its global competitors, has risen to its highest level in two decades this week.

After a so-called 'inversion' during yesterday's Wall Street session, 2-year Treasury note rates traded north of 10-year note rates throughout the overnight session. In early New York trading, benchmark 10-year notes were last seen trading at 2.765%, while 2-year notes were last seen trading at 2.786%.

As traders sell short-term notes in anticipation of rate rises, but buy longer-dated paper in anticipation of an economic slowdown, investors typically associated a sustained inversion as a near-term recession.

The Atlanta Fed's GDPNow growth prediction tool suggests that the economy is shrinking at a 2.2 percent pace as it enters the third quarter, following what is likely to be two consecutive quarters of decline between January and June.

That puts a lot of emphasis on the Federal Reserve's commitment to raising interest rates in order to quell consumer price pressures for the first time in forty years. But some investors are concerned whether the Fed will slow the pace of signaled rate hikes if the country falls into recession.

Minutes from the Fed's June meeting, which are expected later today, may provide at least a few clues about this prospect as well as specifics on the background of the central bank's largest single-day rate rise in three decades and its assurances of additional increases in the coming months.

On June 15, the Federal Reserve raised its base lending rate by 75 basis points, the highest level since 1994, to a range of 1.5 percent to 1.5 percent, and said near-term rate increases would be required in order to combat the faster rate since the early 1980s.

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Oil prices in the United States are plummeting below $96 as fears of the recession mount; gas prices are expected to fall.

Chairman of the Federal Reserve, who had advised investors to a rate rise of only 50 basis points, said at the time that rate rises of that magnitude would not be "common," but current market betting suggests a 88% probability of a similar-sized rise when the Fed meets later this month in Washington.

In overnight trading, the stronger greenback, which makes oil more costly for developing and non-dollar economies around the world, kept a lid on crude prices, despite the fact that Mohammad Barkindo, the secretary general of OPEC, died at the age of 63 just hours after delivering a speech in Abuja.

Many believe Barkindo, who served as Nigeria's energy minister before taking on the top position at OPEC in 2006 and again in 2016, to have helped organize the cartel into a more organized group of oil producing nations that, along with Russia, has dictated the flow of oil for most of the past six years.

The most closely-linked commodity to U.S gasoline prices, WTI crude futures for August delivery, were marked $3.43 lower on the session at $96.05 per barrel, while Brent crude contracts for September delivery, the global pricing benchmark, fell $3.10 to change hands at $99.67 per barrel.

As the euro fell to 1.0176 against the US dollar, Europe's Stoxx 600 was marked 1.75% higher by the close of trade in Frankfurt.

The MSCI ex-Japan index, which spanned Asia, fell 0.95%, while the Nikkei 225 index, which closed 1.2% lower in Tokyo.

On Wall Street, the S&P 500 lost 18 points, while the Dow Jones Industrial Average lost 131 points, and the tech-focused Nasdaq lost 55 points.

Reportshares were active in early trading after data from China showed a solid rebound in June sales, following on from a record month of production for the carmaker in the world's largest auto market.

Tesla sold 78,000 China-made cars last month, up from 32,165 in May, and the highest on record for a clean-energy automobile manufacturer. In April, the group's Shanghai gigafactory was shut for 22 days due to the city's strict Covid lockdown.

After Just East Takeaway (TKAYF) announced the acquisition of a 2% share in its U.S. subsidiary known as Grubhub, food delivery stocks were also on the rise.

Following the news of the Amazon stake in Grubhub, Uber Technologies (UBER) - Get Uber Technologies Inc. Reportshares were 3.11% lower at $21.82, while DoorDash (DASH) - Get DoorDash Inc. Class A Report fell 8.65% to $68.42 each, as investors cut their losses on meal delivery leaders.

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