US stocks finish higher as market weighs recession risk

NEW YORK (AFP) – Wall Street stocks finished higher following another volatile session on Thursday (June 23) as investors assess how rising recession risk affects the outlook for oil prices and monetary policy.

Equities overcame a midday sag as Federal Reserve chairman Jerome Powell, in a second day of testimony on Capitol Hill, downplayed the idea that government pandemic aid was the key factor fueling US inflation as he continued to vow a tough response to inflation.

But Karl Haeling of LBBW said markets have “significantly shifted rate hike expectations” over the last week as recession chatter has grown. Investors now anticipate the United States will be essentially finished with rate hikes in 2022 rather than in 2023.

“That leaves a big decision for equities,” Haeling said. “Do you sell off because the economy is going into a recession, or do you rally because the scope of the rate hikes is going to be less and faster than you thought it was going to be?”

The Dow Jones Industrial Average ended up 0.6 per cent at 30,677.36.

The broad-based S&P 500 gained 1 per cent to finish at 3,795.73, while the tech-rich Nasdaq Composite Index advanced 1.6 per cent to 11,232.19.

Stocks are in positive territory for the week in a shift from the dreary trend this year that has seen equities slump as inflation and tightening monetary policy dominate discussion.

Among individual companies, homebuilder KB Home jumped 8.6 per cent as it reported better-than-expected earnings even as it cautioned of the drag from higher mortgage rates.