U.S. economy is ‘technically’ in a recession now: what’s next?

U.S. equities are in the green this morning even after the Bureau of Economic Analysis said the economy contracted at an annualised pace of 0.9% in the second quarter of 2022.

Expert reacts to the GDP report on CNBC

In comparison, the Dow Jones estimate was a narrower 0.3% contraction. The U.S. economy is now “technically” in a recession since it was the second straight quarter of negative GDP.

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Cutting 2.0% from the total, inventories contributed the most to the economic slowdown from April through June. Reacting to the report on CNBC’s “Squawk Box”, iCapital’s Anastasia Amoroso said:

I think it’s exactly the number and details that the Fed wanted to see. They’re trying to engineer a slowdown in the goods sector, the inventory sector of the economy. That’s exactly where we saw the pullback in this GDP report.

S&P 500 is keeping above the key 4,000 level on Thursday.

U.S. stocks could bounce in H2

According to Amoroso, the quarterly report did create some room for the central bank to turn a bit less hawkish moving forward. Explaining what it could mean for the stock market, she added:

I suspect that as we move past this report, we’ll focus on the fact that the Fed is now going from this emergency state of rate increase to something a bit more normal, and that should be positive for stocks in the second half of the year.

Last night, the U.S. Fed lifted rates by another 75 basis points to fight inflation that climbed to a new forty-year high of 9.10% in June.

Also on Thursday, unemployment claims for the week of July 23^rd came in at 256,000 – down about 2.0% from the prior week.