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US stocks gain to kick of the 3rd quarter as bond yields fall on recession fears

Traders work on the floor of the New York Stock Exchange (NYSE)

Spencer Platt/Getty Images

  • US stocks kicked the third-quarter off with gains on Friday following the first half’s worst start since 1970.
  • The gains came as interest rates fell, with the 10-Year US Treasury yield hitting a low of 2.80%.
  • Bond yields are starting to fall as investors worry about an imminent economic recession.

US stocks jumped on Friday, kicking off the third-quarter with gains after the first half of the year represented the worse return for the S&P 500 since 1970.

The gains in stocks came as bond yields edged lower, with the 10-Year US Treasury yield falling 8 basis points to 2.89%. The 10-Year yield hit a low of 2.80% on Friday, after trading at a cycle-high of 3.50% in early June.

Bond yields are moving lower because investors are getting more cautious about the potential for an economic growth slowdown and ultimately, a recession. The first-quarter already saw US GDP growth contract by 1.6%, and the Federal Reserve’s GDPNow forecast suggests the second-quarter will also see a decline of about 1%.

That means the US could already be in a recession, as all it takes is two consecutive quarters of negative GDP growth. But for now, bad news like an economic growth slowdown could be good news for the stock market, as slower growth means tamed inflation and the likelihood of fewer interest rate hikes from the Fed.

Here’s where US indexes stood at the 4:00 p.m. ET close on Friday:

  • S&P 500: 3,825.36, up 1.06%
  • Dow Jones Industrial Average31,097.46, up 1.05% (322.03 points)
  • Nasdaq Composite: 11,127.84, up 0.9% 

Michael Burry of “The Big Short” believes that the market’s current 20% decline is only half-way done, as the famed investor now expects a considerable decline in earnings results from companies.

Adjusted for inflation, 2022 first half S&P 500 down 25-26%, and Nasdaq down 34-35%, Bitcoin down 64-65%,” Burry tweeted on Thursday. “That was multiple compression. Next up, earnings compression. So, maybe halfway there.”

With the first half of 2022 in the books, take a look at the 10 worst performing stocks in the S&P 500. Most of the stocks were either in the technology or consumer discretionary sectors, with some high profile names like Netflix and PayPal topping the list, among others.

A decline in interest rates flowed through to mortgage rates this week, with the 30-year fixed mortgage falling to 5.7%, according to data from Freddie Mac. That decline helped push lumber prices higher by more than 7% on Thursday.

Russian president Vladimir Putin has moved to seize control of the Sakhalin-2 oil and gas project, threatening to push out major foreign players including Shell. The move could put continued upside pressure on gas prices going forward.

West Texas Intermediate crude oil rose as much as much as 2.56% to $108.38 per barrel. Brent crude, oil’s international benchmark, jumped as much as 2.39% to $111.64. 

Bitcoin prices fell 2.12% to $19,298. Ether prices jumped 0.59% to $1,060.

Gold moved up 0.09% to $1,809.10 per ounce. The yield on the 10-year Treasury fell 8 basis points to 2.89%.

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