Dow soars 332 points after early losses as traders digest a 2nd straight negative GDP print

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Fed Chair Jerome Powell is likely to start reducing the Fed’s balance sheet this year, analysts say.Kevin Dietsch/Getty Images

  • Stocks rallied Thursday following a negative second-quarter GDP print that showed a 0.9% contraction.

  • Policymakers pointed to a strengthening labor market as reason to believe the economy is not currently in a recession.

  • Housing market demand continues to tumble even as mortgage rates dip, according to Freddie Mac.

US stocks rallied into the close Thursday, with all three major indexes rising more than 1% as investors took a second straight negative GDP print as a signal the Federal Reserve could slow rate hikes.

New government data showed the US economy shrank 0.9% in the second quarter, following a 1.6% contraction in the first quarter. Those consecutive declines are widely viewed as indicating a so-called technical recession, though policymakers have pointed to the strong labor market as reason to believe such a severe a downturn hasn’t arrived.

“[W]hen you look at what caused those declines — in both quarters — they are not what drives a real recession, but are more in the nature of technical adjustments,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “What we have here is more of a technical recession than a real one, if you even want to call it a recession.”

Here’s where US indexes stood at the 4 p.m. market close on Thursday: 

In Thursday comments, Janet Yellen said that the US economy isn’t in a recession, echoing comments from Jerome Powell at his Wednesday press conference. A true downturn, she said, is a “broad-based weakening of the economy. That is not what we’re seeing right now.”

In any case, a second straight quarter of contraction shows that the Fed is on the back foot in its fight against inflation, according to Mohamed El-Erian. The top economist said inflation may come down on a headline level, but it won’t decline fast enough.

Demand in the housing market continues to tumble even as mortgage rates dip. “We are seeing a period of deflated sales activity until the market normalizes,” Freddie Mac’s chief economist said.

The gold market, too, should see slower jewelry demand through the end of 2022, the World Gold Council said, citing deteriorating economic growth around the world and a slower recovery in China.

Meanwhile, El Salvador’s finance minister said the nation remains on track for a bitcoin bond even as it has seen a 50% loss on its crypto investment since making it legal tender last year.

Oil traded flat, with West Texas Intermediate slightly down 0.1% to $96.14 a barrel. Brent crude, the international benchmark, crawled higher 0.8% to $107.49 a barrel.

Gold edged higher 1.92% to 1,752.10 per ounce. The 10-year yield dipped 4.9 basis points to 2.683%.

Bitcoin jumped 4.47% to $23,816.02.

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