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Dow and S&P 500 fall as yields slide, Wall Street weighs recession fears

The Dow Jones Industrial Average and S&P 500 fell on Thursday as bond yields slid and Wall Street continued to weigh recession risks.

The Dow fell 124 points, or 0.4%. The S&P 500 inched 0.2% down, while the tech-heavy Nasdaq Composite rose 0.2%.

Those moves come as the yield on the 10-year Treasury note dipped to its lowest level in roughly two weeks, or below 3.1%, as investors continued to mull over the likelihood and scale of an economic downturn. Yields move inversely to prices.

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Federal Reserve Chair Jerome Powell on Thursday reiterated that the central bank is “strongly committed” to bringing down inflation, as he spoke on monetary policy for a second day on Congress. He also noted that a recession is a “possibility,” a fear that has continued to weigh on Wall Street.

“Definitively, we are going into a recession. How severe that recession is yet to be seen,” said Nick Giacoumakis, president of NEIRG Wealth Management.

“It depends on so many factors that I don’t think really anybody can pinpoint whether it’s going to be a really, really deep, hard recession or it’s going to be a hard landing in a more mild recession.”

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UBS is the latest investment bank this week to raise its odds of a recession to 69%, citing lackluster data last week in housing, industrial production and capital goods.

“We are now watching out for any further negative follow-through or whether we simply hit a local peak and some growth momentum in the hard data resumes,” UBS said in a Thursday note.

Earlier this week, Citigroup increased its odds of a recession to 50%, citing a slide in consumer demand that could make it more difficult for the Federal Reserve to achieve a soft landing. Meanwhile, Goldman Sachs said the probability of a downturn is “higher and more front-loaded.”

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On the other hand, a top strategist at JPMorgan on Thursday said he believes the U.S. economy will dodge a recession altogether, with the stock market making back any losses in the back half of the year.

Energy was the worst performing sector in the S&P 500 as oil prices took a hit. Brent crude futures lowered 1.5% to $110.18 per barrel. U.S. West Texas Intermediate (WTI) crude futures dropped 1.6%, to $104.45 per barrel. 

Shares of Schlumberger dropped 8%. Shares of Valero Energy and Phillips 66 each fell 7%.

Airline stocks dragged on the broader market index. Shares of United Airlines dropped 5% as it cut back on flights out of Newark by 12%. Shares of American Airlines fell 3% after the airline said it was dropping service out of four small U.S. cities.

Meanwhile, homebuilder stocks made gains, as the Home Construction ETF (ITB) gained 3.4% on Thursday and 5.4% this week. Shares of Lennar and D.R. Horton are up 3% and 4%, respectively.

Stocks vacillated Thursday as they struggled to pull back from the lows of the bear market. Still, the major averages are set for a positive week, with the Dow up 1%, the S&P 500 gaining 2% and the Nasdaq Composite increasing 2% week to date.

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On Thursday, the Labor Department said U.S. weekly jobless claims fell 2,000 to a seasonally adjusted 229,000 for the week ended June 18, though the labor market remains tight.

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