4:16pm: Billionaire investor would be "stunned" if there isn't a recession next year
The Dow closed Wednesday up 547 points, 1.9%, at 29,682, the Nasdaq Composite added 222 points, 2.1%, to 1,052 and the S&P 500 improved 71 points, 2%, to 3,719. The Dow snapped a six-day winning streak, thanks in part to The Home Depot Inc, which saw shares gain 5% to $282.24.
Despite the significant bounce, some investors such as billionaire Stanley Druckenmiller believe there is still plenty of room for markets to fall. Druckenmiller spoke at CNBC's Delivering Alpha Summit on Wednesday in New York and delivered a warning to attendees.
“Our central case is a hard landing by the end of ’23,” Druckenmiller said. “I will be stunned if we don’t have recession in ’23. I don’t know the timing but certainly by the end of ’23. I will not be surprised if it’s not larger than the so-called average garden variety. ... I don’t rule out something really bad."
12.05 pm: Equities seesaw as volatile trading continues
US stocks rose in noon trading after the Bank of England (BOE) announced a bond-buying plan, which stabilized the British pound, while the 10-year US Treasury yield pulled back after surging past 4% for the first time since 2008.
At midday, the Dow gained 359 points to 29,494, while the S&P 500 added 50 points at 3,698 and the tech-heavy Nasdaq rose 141 points to 10,970.
“Long-dated US Treasury price volatility is hitting statistically unusual levels right now, just as it did in June 2022,” DataTrek’s Nicholas Colas wrote in a morning note.
“US equities bottomed in that month once yields stabilized,” Colas added.
Notable movers included shares of Apple Inc, which slid about 3% after the consumer electronics giant said it is abandoning plans to increase new iPhone production after demand fell short of expectations.
Biogen shares, meanwhile, soared more than 35% after the global biotech company revealed successful trial results for its experimental Alzheimer's drug.
9.35am: Wall Street mixed at the open
US stocks opened mixed as recession fears continued to cast a shadow over investor confidence.
Just after the open, the Dow Jones Industrial Average was up 80 points or 0.3% at 29,283 points, the S&P 500 was up 8 points or 0.2% at 3,655 points, and the Nasdaq Composite was down 9 points or 0.1% at 10,821 points.
Biopharmaceutical company Mind Medicine Inc had tanked more than 52% after the company announced a proposed public offering on Tuesday.
Apple was down about 3% at the open on reports the company was easing off plans to increase production of the new iPhone 14 after demand failed to meet expectations.
On the other hand, Biogen Inc stock had jumped about 40% following positive results from a clinical trial involving the company's experimental Alzheimer’s drug which found the drug slowed the progress of Alzheimer’s by 27% compared to a placebo.
6.30am: Retreat, retreat
US stocks are expected to retreat further, continuing falls from last week as investors expect the economy to falter under the weight of the Federal Reserve’s aggressive interest rate increases.
Futures for the Dow Jones Industrial Average were down 0.9% in pre-market trading, while those for the S&P 500 shed 1.2%, and contracts for the Nasdaq-100 were 1.6% lower.
All three indices have now slipped into bear market territory, roughly defined as levels around 20% lower than recent highs. Meanwhile, the dollar continues to strengthen across the board and yields on US Treasuries have risen.
Share prices have been falling since the middle of last week when the Federal Reserve delivered its third straight 75 basis point interest rate increase and signaled that it will continue raising rates to tackle runaway inflation.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank noted that the hawkish talk from rate setters has not dissipated.
She cited James Bullard, president of the Federal Reserve Bank of St. Louis, who was quoted as saying that he sees interest rates going to the 4.5% range, which is a full percentage point higher than projected back in April, and Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, normally a dovish Fed member, saying that the Fed moves are ‘appropriately’ aggressive.
“Squeezing the world economy like a lemon may not be the greatest idea, and going this fast given the world context – the war, the energy crisis – will not make up for the fact that the Fed waited too long before acting against inflation last year,” Ozkardeskaya said.
“So, it is well possible that after having wrongly insisted that inflation was ‘transitory’, the Fed could now make a second big mistake of tightening beyond appropriate,” she added.
Russia’s continuing aggression in Ukraine and the ensuing energy crisis are some of the main factors for rising price pressures. Turmoil in currency markets, with the pound dropping sharply while the dollar continues to rise, is also adding to the overall gloom.
Contact the author at jon.hopkins@proactiveinvestors.com