by Matthew Rusling
WASHINGTON, July 29 (Xinhua) -- In a highly unusual development, U.S. markets rallied this week despite a double-whammy of bad news - another rate hike and a technical recession.
The U.S. gross domestic product (GDP), which refers to the value of all U.S.-produced goods and services, shrank by 0.9 percent at an annualized rate in the April-June quarter, according to data from the Commerce Department Thursday.
The drop came on the heels of last quarter's 1.6 percent decline, meeting the technical definition of a recession.
But in a bizarre twist, markets were up on the news.
The Dow Jones Industrial Average on Friday rose just under a percentage point, for a weekly gain of nearly 3 percent. The Nasdaq ticked upward 1.88 percent, and saw a week-on-week rise of 4.67 percent.
That came on the heels of another development that should have roiled the markets but didn't.
Earlier in the week, the U.S. Federal Reserve imposed another 75-basis-point rate hike, the largest back-to-back rate increase in decades, in a bid to tamp down rampant inflation.
But that didn't vex the markets, and the Dow rose 1.03 percent on Thursday, after climbing the previous day. The tech-heavy Nasdaq increased 1.08 percent for a two-day winning streak.
Investors on Thursday continued to eye the week's avalanche of second-quarter earnings reports. Etsy and Honeywell reported solid earnings, both increasing their share price. Ford Motors beat estimates for profits and revenue.
"I think the market is increasingly starting to discount the fact that the Fed's case to continue (raising) interest rates might be winding down, or might be already over," James Paulsen, chief investment strategist of The Leuthold Group, a U.S. investment research firm, told Xinhua.
Fed Chair Jerome Powell, however, said Wednesday afternoon at a press conference that "another unusually large increase could be appropriate at our next meeting."
Still, there remains no consensus among economists on the week's economic data. Many said the United States is now in a recession, while others note record low jobless rates and solid quarterly earnings among many companies.
Dean Baker, senior economist at the Center for Economic and Policy Research, told Xinhua: "There is no recession or anything close to it."
But Desmond Lachman, senior fellow at the American Enterprise Institute, expressed pessimism.
There are "all too many indications" that the Fed's interest rate hikes are setting the United States up for a hard landing by year's end, said Lachman, a former International Monetary Fund official.
All this comes as the White House takes much flak for surging inflation, which has outpaced wage growth and has millions of Americans struggling to make ends meet.
Inflation has caused small businesses to shutter, has drastically hiked the price of food and gasoline, and the level of household debt has risen so far this year.
That's causing U.S. President Joe Biden to take a shellacking in the polls, with the commander-in-chief's approval rating at 38.1 percent, according to Real Clear Politics poll average.
An article in the Washington Examiner, which had been filed from a small town in Pennsylvania, shed some light on the suffering many Americans continue to feel.
"Loss of customers, supply chain problems, doubling and sometimes tripling of food costs, utility costs, and the ability to find or keep workers" are just some of the problems that Americans far from major cities are experiencing, the Examiner reported earlier this week.
Brookings Institution Senior Fellow Darrell West told Xinhua: "The way in which people experience the economy varies a lot from person to person and place to place."
"Not many are having the same experience, so the election ramifications likely will vary considerably," he said. "Republicans still look in good shape to take the House, but the Senate remains a toss-up."
Clay Ramsay, a senior research associate at the Center for International and Security Studies at the University of Maryland, told Xinhua that "voters understandably want more predictability and regularity in their lives."
"And that's what's not happening, especially because inflation is a novelty to them. That's the Republicans' best card," said Ramsay. ■