Leading US CEOs see a recession despite positive economic data: ASX 200 additions & removals

US equities finished lower in fairly quiet Friday trading, oscillating in the same trading range for much of the session.

At the closing bell, the Dow Jones lost 1.1 per cent to 32,900, the S&P 500 fell 1.6 per cent to 4,109 and the Nasdaq dropped 2.5 per cent to 12,013.

Major indices logged weekly declines after notching big gains in the prior week; S&P now down eight of past nine weeks.

Big tech was a weight on Friday. Mega-cap tech names Google-parent Alphabet and Meta Platforms declined roughly 2.6 per cent and 4.1 per cent, respectively. Apple pulled back about 3.9% after a cautious research note from Morgan Stanley. The firm said slowing App Store growth could hurt the company in the near-term. US Coinbase Global dropped 9.7 per cent after announcing in a blog post that given the macro environment, it has extended its hiring pause for the foreseeable future; also said it will rescind a number of accepted offers.

Soon after Reuters reported Tesla’s CEO Musk said in internal email he has a super bad feeling" about the economy, adding that the company needs to cut ~10 per cent of its staff and freeze global hiring -9.2 per cent.

Further negative comments came from Snap boss Evan Spiegel wrote that the “macroeconomic environment has deteriorated further and faster than anticipated,” which resulted in a $135 billion wipeout across social media stocks.

Of course these aren’t the first negative comments on the market. Last week - Jamie Dimon, JP Morgan CEO, the leading US bank, detected a "hurricane" on the horizon fast approaching the global economy. “You’d better brace yourself,” Dimon told the roomful of analysts and investors. “JPMorgan is bracing ourselves and we’re going to be very conservative with our balance sheet.” There are two main factors that has Dimon worried: So-called quantitative tightening, or QT, is scheduled to begin this month and will ramp up to $95 billion a month in reduced bond holdings. The other large factor worrying Dimon is the Ukraine war and its impact on commodities, including food and fuel. Oil could hit $150 or $175 a barrel, he said.

WTI crude settled up 1.7 per cent.

On Friday, all sectors were negative with the exception of energy sector.

Interestingly there was more M&A activity in the biotech sector which could be pointing to a bottom in the sector. Turning Point Therapeutics (TPTX) stock gained 118.4 per cent after an announcement that Bristol Myers Squibb (BMY) will buy the company for $4.1 billion. The company’s market cap before it was announced that it will be acquired was just over $1 billion. When deal number goes up as well as deal value, then it becomes a safer bet that the larger biopharmaceutical companies are seeing real value across the board and that many companies may be undervalued.

One of the major concerns looking forward is corporate earnings. Higher rates and slower economic growth likely means slower earnings growth. With aggregate 2022 S&P 500 earnings per share estimates still up for the year according to FactSet, “we think the market is going to have to go through an earnings reckoning,” Head of Investment Strategy at Citi U.S. Wealth Management said.

On the economic front, The Labor Department reported Friday that employers added 390,000 jobs, the 17th straight monthly gain. The unemployment rate was 3.6 percent for the third straight month, a touch away from a half-century low. Importantly there was little sign of wage cost pressures – despite wage rises across the economy

Who’s right about the recession: CEOs or the data? While some leading CEOs are sounding the alarm on a recession, the actual economic data isn’t saying the same thing. Of course while the data is backward looking - business leaders like Elon Musk & Jamie Diamond – seem to be seeing something the economic data will only ever show retrospectively – only time will tell.

Treasuries were weaker across the curve, extending the recent backup in yields.
The US dollar was better on the major crosses.
Gold finished down 1.1 per cent.
Bitcoin futures were down 2.5 per cent.

In Australia today watch out for changes in the ASX200 index changes today post he index rebalancing: Index removals include – Appen, Codan, platinum Asset Management, Tyro Payments and Polynovo. Inclusions into the ASX 200 includes Lake Resource, Brainchip, Core Lithium & New Hope Corp. Watch out for index buying and selling today post these removals & additions

The SPI futures are pointing to 0.4 per cent fall.

Commodities

Iron ore futures point to a 3.8 per cent gain. Gold has dropped $21.20 or 1.1 per cent to US$1850 an ounce. Silver was down $0.37 or 1.7 per cent to US$21.91 an ounce.
Oil has added $2.00 or 1.7 per cent to US$118.87 a barrel.

Currencies

One Australian Dollar at 7:00 AM has weakened since Friday, buying 72.20 US cents (Thu: 72.67 US cents), 57.99 Pence Sterling, 94.56 Yen and 67.39 Euro cents.

Ex-dividend

There are seven companies set to trade without the right to its dividend.

ALS (ASX:ALQ) is paying 17 cents 30 per cent franked
Aneka Tambang (ASX:ATM) is paying 1.483 cents unfranked
Champion Iron (ASX:CIA) is paying 10.9661 cents unfranked
Incitec Pivot (ASX:IPL) is paying 10 cents fully franked
Morphic Ethical Equities Fund (ASX:MEC) is paying 1.5 100
Oceania Healthcare (ASX:OCA) is paying 1.7708 cents unfranked
WAM Capital (ASX:WAM) is paying 7.75 cents fully franked

Dividend-pay

There are two companies set to pay eligible shareholders today

NAOS Ex-50 Opportunities Company (ASX:NAC)
NAOS Small Cap Opportunities Company (ASX:NSC)

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