US Stock Market Shows Mixed Performance as Nasdaq Composite Leads Gains

Having been closed for a holiday on Monday, the US stock market resumed Tuesday’s session with a mixed performance with the Nasdaq Composite (INDEXNASDAQ: .IXIC) soaring by 1.75% to 11,322.24 to lead gains.

The S&P 500 Index (INDEXSP: .INX) also closed in the bullish zone by 0.16% to 3,831.39. The performance of the S&P 500 is a rather impressive one as the index was trading at a 2% loss for the better part of the trading session. Of the major indices, the 30 stock index, Dow Jones Industrial Average (INDEXDJX: .DJI) underperformed when compared with its peers.

The Dow closed the session down 0.42%, shedding 129.44 to 30,967.82. Despite the performances, futures tied to these US equities remained largely unchanged on Tuesday as futures tied to the S&P 500, Dow Jones, and Nasdaq Composite were all close to the flatline.

The underlying reaction to the market by investors is hinged on the fears that a recession might be just around the corner. Since the Federal Reserve tapered down on its Quantitative Easing program, it has continued to raise interest rates in a bid to curtail inflation. With the CPI reading topping 8.6%in May, there is little evidence that the consistent rate hikes are generating the expected results.

″[The market] has been bracing for [a recession], and now it may actually be embracing it, the idea being: let’s just get it over with, we’re going have a recession, let’s do it. Let’s clean out the excesses and start all over again,” said Ed Yardeni of Yardeni Research on CNBC’s “Closing Bell: Overtime”.

So many key economic data are bound to be released today with more anticipated Feds minutes for the month of June. Should the data point to a negative trend, many investors may start gearing up for next year.

“The market starting to look ahead into next year and that could very well be a recovery year from whatever this recessionary environment turns out to be,” he added. “We’re all kind of doing a Hamlet recession – to be or not to be. I’m kind of thinking that there’s going to be a mild recession.”

The Future of the US Stock Market

Every notable monetary action taken by the US Federal Reserve affects the stock market in a lot of ways. Many are predicting there will be a pivot at a time when the Feds may retrace its steps should the inflation reading continue to get worse.

While the US stock market is bracing for a recession, several market experts are expecting this to be a mild one.

“Do we have a kind of drawdown that looks to be in that 30% range, which is the average for recessions, or something that looks closer to down 50%, which is what we saw back in the early 2000s and 2008 where we had two debt crises?” said NewEdge Wealth chief investment officer Cameron Dawson. “We don’t see a debt crisis. We think that we could start to find some value around that 3,400-3,500 level because that’s what gets us back to the pre-Covid highs.”

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