Global stock markets end week in a slump over fears of U.S. recession
Stocks tumbled Friday on worries the U.S. economy could be cracking under the weight of high interest rates meant to whip inflation.
The S&P 500 fell 1.8 per cent on Friday for its first back-to-back loss of at least one per cent since April. The Dow Jones industrial average lost 1.5 per cent, and the Nasdaq composite fell 2.4 per cent.
Canada’s main stock index, the S&P/TSX composite, fell 2.1 per cent on Friday as major energy, technology and industrial stocks all tumbled, marking its steepest drop since mid-February.
A report showing hiring by U.S. employers slowed last month by much more than economists expected sent fear through markets, with both stocks and bond yields dropping sharply.
It followed a batch of weaker-than-expected reports on the economy from a day earlier, including worsening U.S. manufacturing activity, which has been one of the areas hurt most by high interest rates.
It was just a couple of days ago that U.S. stock indexes jumped to their best day in months after Federal Reserve chair Jerome Powell gave the clearest indication yet that inflation has slowed enough for rate cuts to begin in September.
Now, worries are rising that the Fed may have kept its main interest rate at a two-decade high for too long. A rate cut would make it easier for U.S. households and companies to borrow money and boost the economy, but it could take months to a year for the full effects to filter through.
Recession far from a certainty
“The Fed is seizing defeat from the jaws of victory,” said Brian Jacobsen, chief economist at Annex Wealth Management. “Economic momentum has slowed so much that a rate cut in September will be too little and too late.”
Jacobsen said the U.S. central bank will have to “do something bigger” than the traditional cut of a quarter of a percentage point in order to avert a recession.
Traders are now betting on a nearly three-in-four chance that the Fed will cut its main interest rate by half a percentage point in September, according to data from CME Group. That’s even though Powell said Wednesday that such a deep reduction is “not something we’re thinking about right now.”
Of course, the U.S. economy is still growing, and a recession is far from a certainty. The Fed has been clear about the tightrope it’s walking since it started hiking rates sharply in March 2022: Being too aggressive would choke the economy, but going too soft would give inflation more oxygen and hurt everyone.
While refusing to claim victory on either the jobs or the inflation front on Wednesday, before the discouraging economic reports hit, Powell said Fed officials “have a lot of room to respond if we were to see weakness” in the job market after hiking its main rate so high.
“Yes, the economy is weakening, but I am not convinced there is enough evidence that the data so far is a death knell for the economy,” said Nathan Thooft, senior portfolio manager at Manulife Investment Management.
U.S. stocks had already appeared to be headed for losses on Friday before the disappointing jobs report thudded onto Wall Street.
Several big technology companies turned in underwhelming profit reports. Amazon, for example, fell 9.2 per cent after reporting weaker revenue than expected for the latest quarter.
Intel dropped even more — 26.7 per cent and on pace for its worst day in 50 years — after the chip company’s profit for the latest quarter fell well short of forecasts. It also suspended its dividend payment and said it expects to lose money in the third quarter, when analysts were forecasting a profit.
Published at Fri, 02 Aug 2024 21:26:39 +0000
Kamala Harris secures delegate votes needed to clinch Democrats’ presidential nomination
U.S. Vice-President Kamala Harris on Friday secured the delegate votes needed to clinch the Democratic U.S. presidential nomination and become the first woman of colour at the top of a major party ticket.
Harris became the front-runner for the Democratic nomination after U.S. President Joe Biden bowed to pressure from within the party and dropped out of the race last month. Harris quickly won the support of party heavyweights and was the only candidate to qualify for the Democratic presidential ballot, which ensured the outcome of the delegate voting was never in doubt.
Party delegates voted virtually this week. Harris, who joined the livestream event where the announcement was made, said she would officially accept the nomination next week after the virtual voting period had closed.
“But already I’m happy to know that we have enough delegates to secure the nomination,” said Harris, the first Black and South Asian person to become U.S. vice-president.
“And later this month, we will gather in Chicago united as one party where we’re going to have an opportunity to celebrate this historic moment together.”
Harris needed to pass a 2,350-vote threshold from delegates to formally secure the nomination, her campaign said.
Democratic leaders had pledged to deliver a presidential nominee by Aug. 7, before the Aug. 19-22 Democratic National Convention (DNC) in Chicago.
The DNC had said a virtual vote was needed to ensure the nomination process was completed by Aug. 7, the date by which Ohio law required a nominee in place to make the state’s ballot.
Ohio lawmakers subsequently pushed back the deadline to Sept. 1, but party officials said they nevertheless wanted to meet the Aug. 7 deadline to avoid any legal risk in the state.
Published at Fri, 02 Aug 2024 19:28:47 +0000
