The US stock market posted a solid performance on Thursday, with data showing that inflation jumped to a new 40-year high even before the impact of recent sanctions on Russia, a rather depressing outcome of the Russian-Ukrainian meeting. foreign ministers in Turkey and an unexpectedly belligerent decision by the European Central Bank.
Aside from the humanitarian catastrophe, sky-high commodity prices have so far been the result of a two-week invasion. Economists at Goldman Sachs cut their growth forecast for the world’s largest economy in 2022 to 1.75% from 2% earlier and the consensus forecast of 2.75%.
This is a pretty simple call. “Combining our commodity strategists’ forecasts with consumer price pass-through estimates, we estimate that rising gas and food prices will result in an effective 0.7 percentage point drop in real disposable personal income in 2022, with a larger deceleration for households with low-income people whose spending tends to be more sensitive to income fluctuations,” says the note, written by Joseph Briggs. “While households are likely to partially offset this decline in income through reduced savings, this hit to income should weigh on spending in 2022.”
In addition to commodity prices, the Goldman team also noted that consumer sentiment tends to be affected by geopolitical crises, and Morning Consult and Ipsos have already declined. Lower growth forecasts in Europe will hurt US exports, and tightening financial conditions will also weigh on US economic growth.
The Goldman team said they may be overly optimistic about the outlook for the US economy. “Even after these downgrades, we still believe that the risks associated with our growth outlook are skewed to the downside, especially if sanctions escalate or oil prices continue to rise, for example, to a price target of $175 per barrel, which our Commodity strategists say it’s possible if supply losses reach four million bpd. In addition, we do not expect any growth due to the shortage of the metal, since, apart from palladium, only a small part of the demand for commodities in the US is met by exports from Russia,” said Briggs.
The risks of a recession, they say, are rising. While they expect further opening up of the services sector and spending through excess savings to keep the US economy growing, they said the chances of a recession next year are between 20% and 35%, roughly in line with the slope of the US Treasury yield curve. .
Schedule
It wasn’t too long ago when European stocks were the fashion call for 2022, with the logic that the region would benefit from NextGenerationEU spending and a later post-COVID-19 recovery than the US. Investors don’t share that view now, with the biggest retreat from European equities on record.
Buzz
Attention is once again riveted on Russia and Ukraine ahead of the weekend. Russian President Vladimir Putin said there were “certain positive developments” in Ukraine, news that led to a rise in stock futures. On Friday, Russia struck military bases in western Ukraine and said it had 16,000 volunteer fighters from the Middle East.
The US and European allies were about to revoke Russia’s “most favored nation” trade status as Russia announced an export ban on more than 200 goods, from medical equipment to locomotives.
China has ordered the isolation of nine million residents of the northeastern city of Changchun due to COVID-19.
Shares of DocuSign DOCU, -21.22% fell 17% after hours after the online signature company posted a forecast for orders and revenue below Wall Street estimates.
Shares of Rivian Automotive RIVN, -4.98%, fell as the electric truck maker cut its production plan.
Education publisher Pearson PSO surged 17.26% after Apollo Global Management said it could make an offer to the company.
The University of Michigan Consumer Sentiment Index is due out at 10:00 am ET.
Markets
US stock futures ES00, +0.56% NQ00, +0.30% rose after Putin’s speech. The yield on 10-year Treasury TMUBMUSD10Y, 2.004% bounced back from 2%, while futures for CL.1 oil, +0.67% traded lower.
Best tickers
These were the most active stock tickers as of 6 am ET.
Ticker | Security Name |
TSLA, -2.31% | Tesla |
GME, -3.74% | game stop |
AMS, -6.07% | AMC Entertainment |
NIO, -5.09% | Nio |
AIMS, +0.09% | Amazon.com |
AAPL, -0.88% | an Apple |
BABA, -4.45% | Alibaba |
RIVN, -4.98% | Rivian Automotive |
CEI, -13.90% | Camber Energy |
MULT, -8.42% | Mullen Automotive |
Random reading
Read a sarcastic letter from Ukraine thanking Russia for military corruption.
Actor Jussie Smollett has been sentenced to 150 days in prison for lying about a fake hate crime.
Musician Grimes and Tesla CEO Elon Musk have chosen another unusual name for their second child.
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