Treasuries surged after an ugly first half as weak economic data added to recession fears. A late-day rebound in stocks was exacerbated by low volume ahead of Monday’s U.S. holiday.
Bond yields sank, with the five-year rate at one stage plunging more than a quarter of a percentage point.
Traders are paying the most since March to hedge against a deeper slide in 10-year U.S. yields.
All major groups in the S&P 500 rose, while the tech-heavy Nasdaq 100 underperformed.
The risk of a renewed selloff in equities is still high as investors are pricing in a mild recession, Goldman Sachs Group strategists said.
Corporate earnings will likely come under pressure as margins face the test of inflation and weakening consumer sentiment, they added.
A gauge of U.S. manufacturing fell to a two-year low.
“That’s what many investors are now worried about – the growth outlook,” said Leo Grohowski, chief investment officer at BNY Mellon Wealth Management.
“That’s the right thing to worry about. We still have to be worried about inflation, but I’m more worried about economic growth slowing.”
Both stocks and bonds were recently rocked by outflows on fears the economy could contract amid sky-high inflation and hawkish central banks.
About $5.8 billion exited global equity funds in the week through June 29, Bank of America Corp. said, citing EPFR Global data. Bonds had redemptions of $17 billion.
A survey conducted by 22V Research showed that 71% of the investors polled believe that second-quarter results will be a negative driver for stocks, wrote founder Dennis DeBusschere.
The respondents also estimated 2022 earnings-per-share will come in around $212 – 7% lower than consensus forecasts of $228.
“I don’t think that equity markets have fully priced in a recession,” said Brad Neuman, director of market strategy at Alger.
“Normally, stocks bottom just before earnings bottom, and earnings haven’t declined yet. Estimates remain far too high.”
In corporate news, Micron Technology flagged that demand was cooling for chips used in computers and smartphones.
General Motors expects second-quarter sales and profit to take a hit due to supply-chain problems, but the automaker said it can make up for delayed production later this year.
Crypto broker Voyager Digital is temporarily suspending trading, deposits and withdrawals due to difficult market conditions, amid a deepening meltdown in beleaguered cryptocurrency markets.
Elsewhere, oil rose as export disruptions in Libya exacerbated global supply concerns.
Copper tumbled to a 17-month low as deepening fears about an economic slowdown drove a rout in industrial commodities.
Crop futures sank in the U.S., with wheat closing the week at levels not seen since before Russia’s invasion of Ukraine,
Global crude prices could reach a “stratospheric” $380 a barrel if U.S. and European penalties prompt Russia to inflict retaliatory crude-output cuts, JPMorgan Chase & Co. analysts warned.
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