Dow Falls Following Weak US Macro Data
23 June 2022
The Dow Jones index traded 0.4% weaker during the US session, changing hands near 30,350 USD as traders mulled the recent economic numbers from the biggest economy in the world.
Miserable US data
Earlier in the day, the US Manufacturing fell from 57.0 to 52.4 (below 56.0 expectations), while the US Services declined from 53.4 to 51.6 (below 53.3 expectations).
Manufacturing printed at its lowest level since June 2020, and services dropped to 5-month lows (but very close to two-year lows too).
As a result, the US Composite PMI fell to 51.2, a 5-month low, signifying a severe weakening in Q2 GDP (and Q3 GDP).
"The pace of US economic growth has slowed sharply in June, with deteriorating forward-looking indicators setting the scene for an economic contraction in the third quarter," Chris Williamson, a chief business economist at S&P Global Market Intelligence, said Thursday.
"The survey data are consistent with the economy expanding at an annualized rate of less than 1% in June, with the goods-producing sector already in decline and the vast service sector slowing sharply."
According to Deutsche Bank, the US economy will officially enter a recession in the third quarter of 2023, which has been predicting one for months. Moreover, the likelihood that the US economy would experience a recession within the next year has increased from 15% to 30%, according to experts at Goldman Sachs.
The four-hour chart still resembles a continuation pattern in the current medium-term downtrend. Moreover, the recent consolidation failed to bring the price significantly above the previous highs of 31,000 USD. Thus, the overall situation looks bearish.
Should the index break below the short-term uptrend line near 30,270 USD, we might see further decline below the psychological level of 30,000 USD, targeting the current cycle lows near 29,700 USD.