Stock index futures are volatile Thursday as investors try to digest a second-straight quarter of GDP contraction.
Nasdaq 100 futures (NDX:IND) -0.4%, S&P futures (SPX) -0.2% and Dow futures (INDU) -0.2% are lower, but a little higher than before the GDP release.
Amid another wave of earnings, Meta is dragging on the market, sliding post-results as analysts fret overongoing challenges.
Preliminary Q2 GDP fell 0.9%, compared with expectations for a 0.5%. Two quarter of negative GDP is one shorthand definition of a recession (although some argue the NBER as the final arbiter). Either way it’s a soft economy.
But in a case of bad news is good news, equities could benefit on anticipation that this will prompt the Fed to rein in tightening even further. Stocks surged yesterday after Jay Powell said that the fed funds rate was already in the range of neutral with the latest hike of 75 basis points.
Bond yields erased gains. The 10-year Treasury yield (US10Y) is down 1 basis point to 2.72% and the 2-year yield (US2Y) is down 8 basis points to 2.89%.
“We think market rates have peaked,” ING said. “Specifically, the 3.5% area reached by the 10yr Treasury yield in mid-June was most likely it.”
“We argue that it’s not about the level per se. It’s about the cycle, and the fact that the influential 5yr area is now signalling a turn in the cycle. Specifically, the 5yr yield is no longer sitting above an interpolation between the 2yr and 10yr (and trading cheap), but is now trading rich.”
Aslo adding to evidence of a weakening economy, weekly jobless claims remained elevated. They unexpectedly rose to 256K.