Dollar and U.S. Stocks Fell Together, Providing Safe-haven Support For Gold
At the beginning of the Asian market on Friday (June 17), spot gold fluctuated slightly, and is now slightly below the 1850 mark, giving back some of the overnight gains. Due to the intensified economic recession worries, the US stock market fell sharply on Thursday, providing a safe haven for gold prices. And because the Swiss National Bank unexpectedly raised interest rates, the Swiss franc rose by nearly 3%, and the Bank of England raised interest rates, the dollar index fell sharply on Thursday, and the gold price topped the 200-day moving average of 1843.80, rising to around $1857. . International oil prices bottomed out on Thursday, as the United States announced new sanctions on Iran, and the energy market once again gathered supply concerns that have driven oil prices soaring this year.
The three major U.S. stock indexes ended sharply lower in a broad sell-off on Thursday as recession fears intensified and central banks around the world moved to curb rising inflation after the Federal Reserve raised interest rates by the most since 1994 on Wednesday. The S&P 500 fell for the sixth day in seven sessions. Stocks rose on Wednesday after the Federal Reserve raised interest rates by an aggressive 75 basis points as expected, helping the index snap its longest losing streak since early January. But interest rate hikes in Switzerland and Britain on Thursday reignited fears that efforts by central banks to curb inflation could lead to a sharp slowdown in global growth or recession.
“That’s the question that people are reassessing today — how likely is a recession, whether corporate profits will meet analysts’ estimates or will they be pulled lower,” said Ascent Private Wealth of U.S. Bank Wealth Management in Minneapolis. "The SNB surprised everyone today by saying we're less worried about the strength of the Swiss franc and more worried about inflation," said Tom Hainlin, global investment strategist at The Group.
The Dow Jones Industrial Average fell 741.46 points, or 2.42%, to 29927.07, the S&P 500 lost 123.22 points, or 3.25%, to 3666.77 and the Nasdaq Composite dropped 453.06 points, or 4.08%, to 10646.10. All 11 major S&P 500 sectors ended lower, but defensive consumer staples outperformed as Walmart, General Mills and Procter & Gamble were among the few gainers. Only 14 stocks in the S&P 500 closed higher. Growth stocks took a hit, with the S&P growth index <.IGX> down 3.75% and the Nasdaq down 4% or more for the fifth time since early May.
The Fed's hopes of a soft landing for the economy are dashing, with analysts at Wells Fargo now pricing in a more than 50 percent chance of a recession. Other banks warning of rising recession risks include Deutsche Bank and Morgan Stanley. The S&P 500, which is down about 23% so far this year, recently confirmed it has been in a bear market since Jan. 3, and the Dow is just one step away from confirming a bear market.
The CBOE Market Volatility Index, known as Wall Street's fear gauge, rose to just below a one-month high of 35.05 hit earlier this week. Many analysts expect the VIX to hit around 40, one of the signs that selling pressure may be peaking.
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