Business briefing

The daily business briefing: July 6, 2022

Recession concerns push oil prices below $100 a barrel, Treasury yield inversion increases recession concerns, and more

1

Recession concerns drive down oil prices

Crude oil prices fell below $100 per barrel on Tuesday for the first time in nearly two months, before rebounding slightly early Wednesday. U.S. benchmark West Texas Intermediate dropped by as much as 10 percent to touch a low of $97.43 before closing down 8 percent at $99.50. WTI rose 1 percent to $100.54 early Wednesday. International benchmark Brent crude closed at $102.77 after falling by more than 10 percent to a low of $101.10 a barrel. Wholesale gas futures also fell by 36 cents a gallon Tuesday, a drop of nearly 10 percent on the day. Analysts said fears of a recession, which could reduce demand for fuel, have prompted a sell-off in oil and gas futures.

2

Treasury yield curve inversion boosts recession concerns

The bond market flashed a warning sign that the economy could be falling into a recession, with 2-year Treasury yields rising to 2.792 percent on Tuesday, above the 10-year bond's 2.789 percent rate. It was the third time this year that 2-year Treasury yields briefly rose above those for 10-year notes. Normally the 10-year Treasury note's yield is higher than short-term yields, but these inversions signal economic weakening and often occur before a recession. Investors are worried that the Federal Reserve's aggressive interest-rate hikes, intended to curb high inflation, could hurt growth. "There's something afoot in investor sentiment that is difficult to ignore," said Ian Lyngen, head of U.S. rates strategy at BMO.

3

Report: Red state economies recovering faster from pandemic

Many workers and employers have relocated to red states as pandemic-era remote work policies drove migration from more expensive and crowded blue states like New York, California, and Illinois. As a result, Republican-leaning states have recovered economically faster than Democratic-leaning states by some measures, The Wall Street Journal reported Tuesday. The newspaper cited a Moody's Analytics index with 13 metrics, including employment, retail sales, and the value of goods and services produced, and found that 11 of the 15 states with the highest readings were red, and eight of the lowest 10 were blue. Since the pandemic started, red states have added 341,000 jobs, while blue states have lost 1.3 million.

4

China's BYD surpasses Tesla in electric and plug-in hybrid sales

Chinese automaker BYD has overtaken Tesla to become the world's No. 1 electric vehicle seller. BYD sold 638,157 electric or plug-in hybrid passenger vehicles in the first half of 2022, according to recent flings. The company, which is backed by billionaire investor Warren Buffett, sold 323,519 battery-only vehicles and 314,638 plug-in hybrids in the first two quarters, including 133,762 electric or plug-in hybrids in June alone. Tesla delivered 564,743 electric vehicles in the first half of the year, according to its quarterly reports. Tesla said it was impeded by supply chain disruptions and factory shutdowns, including the temporary closure of its Shanghai factory during a COVID-19 outbreak. BYD avoided factory closures.

5

Stock futures steady ahead of Fed minutes

U.S. stock futures were little changed early Wednesday ahead of fresh economic data and the release of minutes from the latest Federal Reserve policy meeting. Futures tied to the Dow Jones Industrial Average, the S&P 500, and the Nasdaq were up by about 0.1 percent at 6:45 a.m. ET. The Dow closed down 0.4 percent on Tuesday. The S&P 500 and the Nasdaq gained 0.2 percent and 1.8 percent, respectively, after a late-day rally as falling bond yields gave growth stocks a lift. Rising recession fears are continuing to weigh on the market, but some analysts are speculating that any downturn could be mild.

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