[US Market] Economic Recession Fears Rekindled as Risk Aversion Causes Stocks to Persistently Decline – Short-Term 130 Yen Threshold

In the US stock market on the 5th, the S & P 500 stock index continues to fall. Poor economic data reignited fears of a possible recession, pushing bonds higher as a renewed flight to safety.

stock	closing price	Compared to the previous business day	Rate of change
S&P 500 Stock Index	4090.38	-10.22	-0.25%
Dow Jones Industrial Average	33482.72	80.34	0.24%
NASDAQ Composite Index	11996.86	-129.47	-1.07%

The tech-heavy Nasdaq 100 index fell 1%. The movement of fund rotation from growth stocks progressed. Some of the most speculative sectors of the market bore the brunt, with a basket of unprofitable tech companies tracked by Goldman Sachs Group Inc. falling more than 4%.Regional bank Western Alliance BancorpEven after disclosure of deposit balances, the index of bank stocks remained in negative territory.

The Institute for Supply Management’s (ISM) nonmanufacturing headline index continued to expand activity in March, but fell from the previous month and was well below expectations. The slowdown in new orders is conspicuous. US ADP private payrolls rose by 145,000 in March, slower than market expectations.

U.S. ISM Non-manufacturing Composite Index Falls More Than Expected – Demand Slowdown (2)

U.S. ADP Private Employment Growth Falls Below Market Expectations; Wages Rise Slows (1)

“The risk of a recession is rising,” said Marc Hoefel, chief investment officer at UBS Global Wealth Management. “The outlook for equities is grim. As the slowdown in the U.S. economy becomes more evident, investors should consider the opportunity in bonds and prepare for peak interest rates,” he said.

Comerica Bank chief economist Bill Adams said recent job numbers would encourage a pause in U.S. monetary policy tightening, but if next week’s inflation data surprises the upside, the outlook is for another 0.25 percentage point rate hike. points out that it may still change. “The tightness in the labor market is easing, which is one of the conditions for the Fed to pause rate hikes, but they also want core inflation to slow further,” he said.

US Treasuries

U.S. Treasuries rise. Shorter maturities were especially bought, with 10-year yields falling 1.5 percentage points below the yield on three-month Treasury bills (T-bills), the largest inverted yield curve in decades. This has historically been a credible signal of an economic slowdown.

10-Year U.S. Treasury Yield Hits Year-to-Date Low

government bond	Latest price	YoY change (bp)	Rate of change
US 30-year bond yield	3.57%	-2.8	-0.78%
US 10-Year Treasury Yield	3.31%	-3.0	-0.89%
US 2-Year Treasury Yield	3.79%	-3.1	-0.81%
		US Eastern Time	16:57

“The story has changed dramatically from four weeks ago,” said Ed Al-Husseini, rates strategist at Columbia Threadneedle Investments. It’s clear,” he said.

Cleveland Fed President Mester said the policy rate would have to be raised “a little more” and then held there for some time to get inflation back on target.

Cleveland Fed president says interest rates ‘need to go a little higher’

foreign exchange

The dollar and yen rose in the foreign exchange market. The fallout from forecasts in the ADP private sector employment numbers and the ISM non-manufacturing index has fueled fears of a recession and reignited the flight-to-safety movement.

The yen was also bought against the dollar, temporarily rising 0.8% to 130.64 yen to the dollar.

money order	Latest price	Compared to the previous business day	Rate of change
Bloomberg Dollar Index	1225.67	3.09	0.25%
dollar/yen	¥131.33	-¥0.38	-0.29%
euro/dollar	$1.0907	-$0.46	-0.42%
		US Eastern Time	16:57

“The ADP private payrolls number was significantly weaker than expected, which, along with other labor market indicators, suggests that labor market growth is weakening,” Evercore ISI economist Stan Shipley said. .

crude

New York crude oil futures fell slightly. The uptrend from the second half of last week came to a halt. Although it became clear that US inventories were declining, it was not enough to negate the uncertainty of demand against the backdrop of the uncertain economic outlook.

West Texas Intermediate (WTI) futures have remained largely unchanged around $80 a barrel and the Relative Strength Index (RSI, 9-day) has been in overbought territory for the third straight day. North Sea Brent crude rose slightly higher near the close of trading. Saudi Arabia raised the official selling price of crude oil to Asia for three months in a row. Demand was met with a vote of confidence and market acceptance.

U.S. crude inventories fell by 3.7 million barrels last week. The decline was smaller than traders expected. Other economic data showed that economic activity softened in March.

“Inventory data was bullish for markets, but early morning US economic data overshadowed improvement in demand,” said Rebecca Babin, senior energy trader at CIBC Private Wealth. “Oil gains are likely to be tempered by data indicating a softening economy,” she said.

The West Texas Intermediate (WTI) May contract on the New York Mercantile Exchange (NYMEX) closed at $80.61 a barrel, down 10 cents (0.1%) from the previous day. London ICE North Sea Brent June delivery rose 5 cents to $84.99.

Money

Gold prices in New York remained largely unchanged. The US economic statistics turned out to be weaker than expected, and the outlook for the US policy interest rate trajectory was once again conscious.

The dollar and U.S. Treasuries rallied as recession fears reignited after March’s nonmanufacturing index and private payrolls figures in the same month. It put pressure on gold, which is traded in dollars.

Gold is still trading above the $2,000 mark, with the all-time high of $2,075.47 an ounce set in August 2020 on the horizon. High inflation, a soft labor market, tighter liquidity and credit concerns suggest a continued flight to safety.