S&P 500 reclaims 3850 on upbeat sentiment as recession fears fade

• The S&p 500, the Nasdaq, and the Dow Jones extend gains between 4 and 5 percent in the week.
• UoM Consumer Sentiment plunged, and inflation expectations got lower, seen as a relief by traders.
• Fed’s Bullard commented that fears of a recession are overblown.

US equities are rising for the second consecutive day, and despite being in the mid-North American session, the major indices prepare to post solid gains in the week, within the 4% to 6% range.

The S&P 500 reclaimed the 3,800 mark around 3,887.19 and is up 2.74% in the day, while the heavy-tech index, the Nasdaq Composite, followed suit, gaining 2.36%, up at 11,498.82, followed by the Dow Jones Industrial (DJIA), climbing 2.15%, advancing to 31,330.63.

Sector-wise,  the leading sectors are Financials, up by 3.43 %, followed by Communication Services and Materials, each recording gains of 3.16 % and 3.11%, respectively. The laggards but also up due to the increased risk appetite are Health, Consumer Staples, and Utilities, recording decent gains of 1.46%, 1.27%, and 0.92% each.

Equities jumped courtesy of investors repricing the Federal Reserve rate hike expectations. Fears of a US and global recessions loom due to Thursday’s EU, UK, and US S&P Global PMIs, all expanding but showing signs of slowing their pace. Given the previously mentioned, traders begin to price in “possible” rate cuts, which appears too early to be predicted, as the global economy settles on higher interest rates.

Later in the day, the University of Michigan Consumer Sentiment, on its June final reading, plunged towards 50, dismal reading but inflation expectations easied a relief for investors, which piled in on equities as we head into the weekend.

Further Fed speaking continued in the turn of the St. Louis Fed President James Bullard. He said that fears of a recession in the US are overblown and stated that the US will be fine and that tightening policy will slow down the economy to a trend pace of growth. He reiterated that the Federal funds rate (FFR) would need to move to 3.5% this year.

The US Dollar Index (DXY), a measurement of the greenback’s value against some currencies, lurks some 0.20% at 104.196, while the 10-year US Treasury yield recovers some ground climbing five basis points, yielding 3.123%.

In the commodities complex, the US crude oil benchmark, WTI, rises 2.22 %, exchanging hands at $106.81 BPD. Meanwhile, precious metals like gold (XAU/USD) drop 0.04%, trading at $1829.05 a troy ounce.

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