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Recession Fear Pulls Stock Futures Lower

Recession Fear Pulls Stock Futures Lower

US and European futures are trading lower for the second day in a row while hope for a Santa rally has started to fade. The concern among investors and traders is still the same, and that is the possibility of the Fed making another policy mistake and tipping the economy into a recession. If we listen to the market pundits, most of them do not believe that a recession in the US is going to be a long and deep one. Many believe that the US economy will face a recession, but it is more than likely that the recession will be a mild one.

In stock news, we saw Disney shares traded lower yesterday; the stock dropped over 4% yesterday following a weaker-than-expected opening of its movie “Avatar: The Way of Water”. The company’s stock is already trading near its 52-week low, and last year the stock declined over 40% in value.

Tesla’s stock is also the one to keep an eye on as the Twitter poll held by Elon Musk about his role as a CEO of Twitter concluded with more people voting for him to step down as the CEO of Twitter. The stock traded higher at the beginning of the session but towards the end of the day, it closed with a loss of 0.24%.

On Monday, shares of Amazon saw a significant decline, falling as much as 3% to reach depths not seen since March 2020. As a result of the decline, Amazon’s year-to-date loss was more than 48 percent. This year, the firm has been affected by the downturn in the IT industry, which has been particularly hard on businesses that are vulnerable to the effects of rising interest rates.

US Stock Market 

Dow Jones Industrial Average recorded a loss of more than 162 points or around 0.5%. The S&P 500 had a loss of 0.9%, while the Nasdaq Composite dropped over 1.5%. The stock market is now on course to finish the month and the year with a loss, and investors’ expectations for a Santa Claus surge are rapidly diminishing.

After suffering losses for two weeks in a row, the performance of the stock market in December is looking like it may be one of its worst ever. The Dow is now projected to finish the month with a loss of 5.3%, while the S&P 500 is currently showing a loss of 6.4% during the same period. The Nasdaq Composite is now on pace to have a decrease of 8% for the current month.

More Earnings 

This week, just before the Christmas vacation, a select group of large firms will release the quarterly results of their operations. On Tuesday, before the opening bell, General Mills will disclose its earnings. Following the closing bell, FedEx and Nike are scheduled to disclose their earnings.

Asia 

Over in Asia, it has been mainly about the Bank of Japan. According to a statement released by the central bank, the Bank of Japan has decided to keep its benchmark interest rates unchanged while also announcing that it would adjust its yield curve control range.

The Bank of Japan (BOJ) has announced that it would increase the range of possible variations in the yield on 10-year Japanese government bonds from its current plus and minus 0.25 percentage points to plus and minus 0.5 percentage points.

Oil 

Oil prices have slipped back into negative territory, giving up their gains from yesterday, which were mainly posted on the back of the optimism that the re-opening of the Chinese economy will offset any concerns about recession in the US. Beijing is clear about its message that it will do whatever it takes to boost economic growth in the country, and the fact that China is the biggest importer of oil gives traders much-needed confidence about the future of oil demand.

For now, the price action continues to display that oil prices are in a holding pattern which means that no clear new trend is forming, and the price action continues to consolidate in a solid range. It is unlikely that we will get a major catalyst that can shift oil prices significantly in any one direction, as oil trading tends to be in a quiet session during this part of the year.