Defensive stocks lead Wall Street higher amid recession fears

By Devik Jain and Boleslaw Lasocki

(Reuters) - Wall Street's main indexes rose on Thursday as investors turned to consumer staples and healthcare companies to mitigate their risks if the economy falls into recession.

Following the largest interest rate hike by the Federal Reserve in nearly three decades, investors fear economic growth and corporate profits could come under pressure, with the Ukraine war and the supply chain problems adding to the woes.

Big Wall Street banks including Citigroup (NYSE:C) and Goldman Sachs (NYSE:GS) now see a bigger chance of a recession.

Healthcare, consumer staples, real estate and utilities - sectors considered as safer bets within equities - rose more than 1% each.

The S&P 500 confirmed last week it has been in a bear market, clocking a 20% loss from its January closing peak. The tech-heavy Nasdaq has shed more than 30% from its November peak.

"This is a bit of a relief rally... you could call it a dead cat bounce or a bear trap. There is more room to the downside and much more downside risk," said Greg Swenson, founding partner of Brigg Macadam.

A survey released earlier showed U.S. business activity slowed considerably in June as high inflation and declining consumer confidence dampened demand, resulting in a gauge of new orders contracting for the first time in nearly two years.

Another set of data showed the number of Americans filing new claims for unemployment benefits hovered near a five-month high.

Investors are also keeping an eye on comments from Fed Chair Jerome Powell, who is testifying before the House Financial Services Committee.

He said on Wednesday the central bank is not trying to engineer a recession but is committed to bringing prices under control even if doing so risks an economic downturn.

Money markets are pricing in 75 basis point increase in rates next month, followed by a 50 basis point rise in September.

At 10:13 a.m. ET, the Dow Jones Industrial Average was up 61.59 points, or 0.20%, at 30,544.72, the S&P 500 was up 10.48 points, or 0.28%, at 3,770.37, and the Nasdaq Composite was up 50.22 points, or 0.45%, at 11,103.30.

Occidental Petroleum Corp (NYSE:OXY) rose 1.7% after Warren Buffett's Berkshire Hathaway (NYSE:BRKa) Inc bought another 9.6 million shares of the oil company, boosting its stake to 16.3%.

Snowflake Inc climbed 8.1% after J.P. Morgan upgraded the cloud software company's stock to "overweight" from "neutral".

Meanwhile, U.S. corporations with big oversees operations have started to flag risks from dollar, which hit a 20-year high earlier this month.

Accenture (NYSE:ACN) Plc fell 2.1% after IT services company tempered its earnings expectations for the year due to rising inflation and a stronger dollar.

Advancing issues outnumbered decliners by a 1.42-to-1 ratio on the NYSE and by a 1.70-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week highs and 35 new lows, while the Nasdaq recorded 20 new highs and 72 new lows.