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The long-awaited recession might not arrive

People walk past the New York Stock Exchange (NYSE) on July 12, 2023 in New York City.

Spencer Platt | Getty Images News | Getty Images

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Waiting for earnings
U.S. stocks
made slight gains Monday, but trading volume was lower than average as investors braced for second-quarter earning. European markets, on the other hand, fell. The regional Stoxx 600 index declined 0.6% as most sectors and bourses in the region fell.

Separating the wheat from the people
Russia terminated the Black Sea Grain Initiative, which allowed Ukraine to export food and fertilizers from three Ukrainian ports, hours before the agreement expired. The prices of wheat, corn and soybean all rose on the news. U.N. Secretary-General Antonio Guterres previously described the deal as “indispensable” to global food security.

Merger bonanza
Warren Buffett’s Berkshire Hathaway reduced its stake in Activision Blizzard from 6.7% last year to 1.9% yesterday, according to a securities filing released Monday. The news comes as Microsoft inches closer to completing its $68.7 billion acquisition of Activision. Buffett previously revealed Berkshire added to its initial Activision stake in a bet the deal would close and cause shares to rise.

Unraveling the Thread
Meta’s Threads, its rival to Twitter, launched to great excitement. But not everyone is thrilled. House Judiciary Chair Jim Jordan has asked Meta CEO Mark Zuckerberg to hand over documents about content moderation on Threads, according to a letter obtained exclusively by CNBC. The request is related to an ongoing investigation of technology platform’s policies.

[PRO] The S&P 5,400
Ed Yardeni, president of Yardeni Research and previously chief investment strategist at various financial institutions, thinks the S&P 500 could go on an extended bull run and hit a record high of 5,400 within the next 18 months. Here’s why the market veteran is so optimistic.

The bottom line

Investors were cautiously optimistic yesterday.

Major U.S. indexes edged up. The Dow Jones Industrial Average advanced 0.22% to hit its highest close this year. The S&P 500 gained 0.39% and the Nasdaq Composite climbed 0.93%.

It should be noted, however, that trading volume was muted. The SPDR S&P 500 exchange-traded fund, which tracks the overall index, traded 52.4 million shares, below its 30-day average of 79.1 million.

The slower pace of trading makes sense. Major companies are due to release their earnings reports, starting with Bank of America and Morgan Stanley on Tuesday as well as Goldman Sachs, Netflix and Tesla on Wednesday.  

Investors braced for those reports — and they aren’t expecting good news. Analysts think second-quarter S&P 500 earnings will be more than 7% lower than they were a year ago, according to FactSet data.

But the good news is last quarter’s earnings might be the floor. And things are looking up, not just for markets, but the economy. The long-awaited U.S. recession? Many analysts now think it’s not merely late — it might not even show up.

With both consumer and producer price indexes cooling more than expected, “bringing inflation down to an acceptable level will not require a recession,” Goldman Sachs’ chief economist Jan Hatzius wrote, cutting his projection of a recession from 25% to 20%.

JPMorgan Chase’s chief global markets strategist Marko Kolanovic has been skeptical of a soft landing. But even he noted that “the resilience of the US and global expansions should remain in place,” causing the bank to “downplay near-term recession risks.”

And Ed Yardeni thinks the recession — albeit “a rolling recession,” meaning that different sectors of the economy have taken turns to contract — is already behind us. Instead, “now … we’re in a rolling recovery,” Yardeni said.

As earnings reports are released, don’t look at companies’ figures for the past quarter. Keep an eye out for their projections for the rest of the year. We might yet see signs of hope the economy will continue growing.


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