The U.S. has experienced another quarter of reduced output, in the face of high inflation and rising interest rates.
Gross Domestic Product (GDP), an economic figure that measures the amount of goods and services produced across the economy, was released by Bureau of Economic Analysis Thursday morning.
With recession concerns front and center, U.S. GDP came in lower than expected at -0.9% annually for Q2, versus the estimated +0.4%, following Q1s -1.6% contraction.
This report indicated the economy met the main street definition of a recession, which is two consecutive quarters of declining GDP. Although meeting this loose definition, Treasury Secretary Janet Yellen stated Thursday that the U.S. economy is more in a state of transition, not a recession.
Many investors bought into this thinking, as U.S. index prices finished broadly higher yesterday. Many also hold reservations against the Fed’s ability to create a soft landing, as members had previously stated inflation was transitory as well.
Making up the GPD Q2 annualized figure; residential investments subtracted -0.71%, food and beverage production shrank -0.65%, durable goods were -0.22% lower, food services increased +0.6%, healthcare +0.4%, and recreation improved +0.16% on an annual basis.
Roughly two thirds of GDP measures consumer spending, which rose at an annual rate of +1% for the second quarter, down from +1.8% in the first quarter.
On top of this economic data, the markets are still digesting the 75-basis point interest rate hike initiated Wednesday by the Federal Reserve. Treasury prices yesterday were high, meaning interest rates were inversely lower, which gave room to grow for tech stocks, which rely heavily on leverage expansion.
Last evening, some of the biggest companies in the world released their quarterly earnings figures as well.
Amazon (AMZN) beat revenue estimates while providing positive guidance for Q3, Apple (AAPL) beat on both revenue and profit, while chip maker Intel (INTC) missed.
Technicals
The yield on the benchmark interest rate, the 10-Year Treasury Note, has declined in the last few weeks over fears of recession signals. The September 10-Year Treasury Note futures contract (TYU22) is currently trading down -0-7.5 at 120-24.
Since July 6th, the 10-2-year treasury yield spread has also been inverted. Currently, that yield spread is sitting at -0.17%, which is bullish for treasury prices.
The TYU22 contract rallied in the second week of June once the RSI touched an oversold reading of 24%, now reading almost overbought at 63%. This contract is currently trading below the 200-day SMA, around the 125 handle, but above both 20 and 50-day SMAs.
Contract Specifications
September 10-Year Treasury Note 2022 (TYU22)
Henry Hub Natural Gas July 2022 (NGN22)
Trading Calendar
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