Roundup: U.S. stocks extend losses amid recession fears, various data

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NEW YORK, Aug. 17 (Xinhua) -- U.S. stocks wrapped up the week on a gloomy note, as Wall Street was roiled by broad panic over an impending recession, which struck a blow to the already-dampened investor sentiment. Yet investors also digested a slew of mixed data that offered the market some backup.

In the week ending Aug. 16, the Dow sharply fell 1.51 percent. The S&P 500 dropped 0.99 percent, and the Nasdaq lost 0.69 percent.

This week marked negative trading sessions for the market with a low start yet an upbeat ending, with the three major indexes suffering steep losses at the middle of the week.

On Friday, the three major indexes ended with gains, capping off a tumbling week in a positive note, as the market was mildly buoyed by easing U.S. bond market and a batch of mixed economic data.

The Dow Jones Industrial Average rose 306.62 points, or 1.20 percent, to 25,886.01. The S&P 500 increased 41.08 points, or 1.44 percent, to 2,888.68. The Nasdaq Composite Index increased 129.38 points, or 1.67 percent, to 7,895.99.

Wall Street was heavily battered on Wednesday, as the bond market has flashed worrying signals over a looming recession with inverted yield curves, widely seen as a harbinger of a looming economic recession, between long-dated and short-dated U.S. treasury bills.

The inverted curve appeared between the yields of the two-year and 10-year U.S. treasury bills at some point earlier of the day, marking the first time since 2007.

The spread between the yields of three-month and 10-year notes also posed an inverted curve on Wednesday, which reflected a wave of panic that rippled over the U.S. financial markets.

As investors switched on a risk-off mode and resorted to long-term, safe-haven assets, such as U.S. treasury bills, gold and low-risk currencies, the price of gold rallied and the 30-year treasury bond yield hit an all-time low of a bit over 2 percent.

The Cboe Volatility index, widely considered the best fear gauge in the stock market, surged 26.14 percent to 22.1 on Wednesday.

Growing economic worries stemmed from the latest weakness in economic data, global negative yields abroad, ongoing trade tensions and political turmoil that "all led equities and U.S. treasury yields lower," Leslie Falconio, a senior strategist at UBS Global Wealth Management's (GWM) Chief Investment Office, told Xinhua.

Yet Mark Haefele, global chief investment officer at UBS GWM, suggested that Wall Street should not be over-concerned about the link between inverted yield curves and a future recession.

"Unlike trade conflicts, an inverted yield curve by itself has limited economic impact. Instead, its signal about the health of the economy is what matters, and it is not as negative as some investors fear," said Haefele in a research report on Wednesday.

That's also because there's been a long and variable lag between initial inversion and the start of recessions, normally 22 months on average, he noted. Besides, the length of time the yield curve is inverted and how much is inverted also matter.

In this regard, Matthew Cheslock, a trader with U.S. high-frequency trading and market making firm Virtu Financial, voiced similarly positive views, saying that it might still be early to time a recession based on Wednesday's inverted yield curves.

"Historically, it's 14 to 22 months out. So if you're trying to time this market based on that cross (of the yields between the two-year and 10-year bonds), you might be a little ahead of yourself in the equity side," Cheslock told Xinhua.

"The stock market may have gotten a little ahead of itself today just on a pure panic move," he added. "We saw the same type of event happen last week... We had a panic-type sell move. Then we recouped most of those losses over the next couple of days."

Meanwhile, Wall Street has digested a slew of mixed data since Thursday, among which reports of strong consumer spending in July gave the market an in-time backup.

On the economic front, U.S. consumer sentiment declined in early August to 92.1, marking its lowest level since the start of the year, according to the University of Michigan's survey of consumers released on Friday.

"Monetary and trade policies have heightened consumer uncertainty, but not pessimism, about their future financial prospects," said the survey, adding that consumers strongly reacted to the proposed September increase in tariffs on Chinese imports.

Yet U.S. consumer spending has remained robust, as retail and food services sales rose 0.7 percent to 523.5 billion U.S. dollars in July, following an increase of 0.3 percent in June, said U.S. Census Bureau on Thursday.

Such gains were shown in various sectors last month, including online retail, grocery stores, clothing retail and electronics and appliance stores.

Business activity in New York State and the Philadelphia region both reported growth in August, according to the latest Empire State Manufacturing Survey and the Philadelphia Fed Business Outlook Survey released on Thursday.

In New York State, the headline general business conditions index registered 4.8, following July's reading of 4.3. New orders have increased after declining for the previous two months, and shipments continued to expand.

Manufacturing activity in the Philadelphia region continued to grow. The regional Fed survey's broad indicators remained positive, despite mixed movements this month, as the indicator for new orders increased and the general activity, shipments, and employment indicators decreased.

U.S. Industrial production declined 0.2 percent in July, the U.S. Federal Reserve reported Thursday. Manufacturing output also decreased 0.4 percent last month, with durables, nondurables, and other manufacturing (publishing and logging) all posting decreases.

U.S. initial jobless claims climbed more than expected last week, reaching 220,000, an increase of 9,000 from the previous week, said the Labor Department on Thursday.

U.S. Consumer Price Index (CPI) increased 0.3 percent in July on a seasonally adjusted basis after rising 0.1 percent in June, the U.S. Bureau of Labor Statistics said Tuesday.

Increases in the indexes for gasoline and shelter were the major factors in the seasonally adjusted all items monthly increase. Over the last 12 months, the all items index increased 1.8 percent before seasonal adjustment. Enditem

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