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Wall Street Braces for a Recession Amid Dwindling Consumer Spending

Published: December 12, 2022
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., on December 7, 2022. (Image: REUTERS/Brendan McDermid)

NEW YORK, United States — Compounded by concerns of a looming global recession, U.S. stock indexes rallied to kick off the trading week on Monday, Dec. 12 — lifted in part by gains in Microsoft and Pfizer.

As investors gird for inflation and recession data however, a policy announcement from the Federal Reserve is expected later in the week.

Microsoft Corp. rose following the tech giant’s deal to buy a 4 percent stake in the London Stock Exchange Group, helping to boost each of the three major indexes.

After strong gains in October and November, the benchmark S&P 500 stumbled out of the gate in December, and suffered its biggest weekly percentage decline in nearly three months as mixed economic data helped fuel recession concerns.

Consumer inflation data will be closely monitored on Tuesday, Dec. 13 and is expected to show prices increased by 7.3 percent in November on an annual basis, slowing from the 7.7 percent rise in the previous month, while the “core” reading which excludes food and energy is expected to show a 6.1 percent increase from the 6.3 percent in the prior month.

“The market is pricing in a 6-handle on the CPI tomorrow versus the 7.3 percent that is expected, and if it has a 6-handle on it, then that would be reason enough to get all excited, at least short-term,” said Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.

“The other thing is they are once again expecting Jay Powell to come out and have a dovish tone, which would be a huge mistake. Jay Powell needs to stop giving anyone the inclination they are softening up or they are being dovish.”


According to preliminary data, the S&P 500 gained 55.91 points, or 1.42 percent, to end at 3,990.59 points, while the Nasdaq Composite gained 138.69 points, or 1.26 percent, to 11,143.31. The Dow Jones Industrial Average rose 523.14 points, or 1.56 percent, to 33,999.60.

Pfizer shares gained ground after the drugmaker gave revenue forecasts from vaccines across its portfolio.

A cooler than expected inflation report would help support the belief the aggressive policy actions taken by the Fed this year to slow the economy are taking hold. The central bank is widely expected to hike by 50 basis points on Wednesday — marking a step down from the hikes of 75 basis points in the last four meetings.

Equities were weaker last week after a reading of producer prices for November was more than expected, even though it did show the trend was moderating.

Treasury Secretary Janet Yellen on Sunday forecast a substantial reduction in U.S. price pressure in 2023, while also acknowledging a risk of a recession.

Fears the Fed will make a policy mistake and tilt the economy into a recession have weighed heavily on Wall Street this year, with the S&P 500 down about 16 percent and on track for its first yearly drop since 2018 and largest percentage drop since 2008.

Rivian Automotive Inc lost ground after the company paused its partnership discussions with Mercedes-Benz Vans on electric van production in Europe.

Biotech firm Horizon Therapeutics Plc surged following a buyout offer from Amgen Inc, while Coupa Software Inc soared after agreeing to sell itself to private equity firm Thoma Bravo LLC.

Meanwhile, Weber Inc. climbed after the outdoor cooking firm agreed to be taken private by controlling shareholder BDT Capital Partners LLC.

Reuters contributed to this report.