Stocks bounce back after steep selloff last week

Shares rose sharply on Wall Street on Tuesday, regaining some of the ground they lost in their worst weekly crash since the start of the pandemic.

The S&P 500 rose 90 points, or 2.4%, to close at 3,765. The Dow Jones Industrial Average gained 2.1% and the Nasdaq rose 2.5%.

Technology stocks had some of the strongest gains. Apple rose 3.4% and Microsoft 2.5%. Retailers, healthcare companies and banks also made solid profits. Kellogg rose 2.3% after Frosted Flakes and Rice maker Krispies said it would divided into three companies. Spirit Airlines rose 8% after JetBlue sweetened its takeover bid for the airline.

Approximately 90% of the S&P 500 shares gained ground. Still, the index remains trapped in a fall, along with all other major indices, and is still down about 21% from the all-time high it set in January. A weekly loss has been posted in 10 of the last 11 weeks.

“Shares start the week with very healthy gains, but investors hardly celebrate it given the recent carnage,” equity analyst Adam Crisafulli of Vital Knowledge said in a report. “There is not a single driver for the rally, but a potential shift in the inflation outlook, driven by lower commodity prices and discounts from US retailers, would represent a major macro development.”

“Most people ruled out [Tuesday] The demonstration was nothing more than a bounce of dead cat that was destined to fail in the coming sessions, “he added.

All eyes on the Fed, inflation

Shares have generally been falling as investors adjust to higher interest rates that the Federal Reserve and other central banks are increasingly distributing. Aggressive rate hikes are part of a plan to moderate record inflation, but investors are worried the Fed runs the risk of slowing economic growth too much and causing a recession.

Concerns about inflation and interest rates have been exacerbated by rising energy prices following Russia’s invasion of Ukraine. The price of US crude rose 1% to $ 110.65 a barrel on Tuesday. It has increased by about 52% during the year. This has taken a bigger bite out of people’s portfolio at the gas pump and is causing a slowdown in spending elsewhere.

The national average of one gallon of normal unleaded gas at The U.S. fell to $ 4.97 on Tuesday, a 4-cent drop from a week ago and from a pair of $ 5 on Friday, according to AAA, which updates the figure daily. Patrick De Haan, a GasBuddy analyst, said in a tweet that gas prices “are set to continue to fall this week.”

The persistent list of concerns has generated an extremely turbulent market. Daily changes between gains and losses have been common and major indices have sometimes switched between acute gains and losses per hour.

“In these types of markets, you only get more volatility in both directions,” said Ross Mayfield, Baird’s investment strategist. “The whole market is being shaped by the Fed and inflation numbers.”

Deceleration signals

Last week, the Fed raised its key short-term interest rate by tripling the usual amount largest increase since 1994. It has also just begun to allow some of the trillion-dollar bonds it bought through the pandemic to fall off its balance sheet. This should put upward pressure on long-term interest rates and is another way in which central banks are withdrawing previous supports backed below markets to bolster the economy.

The Fed’s moves are taking place as some discouraging signs have emerged about the economy, such as declining spending on retailers and bitter consumer sentiment. The National Association of Realtors reported on Tuesday that sales of previously occupied homes in the United States slowed fourth consecutive month. The housing market, a crucial part of the economy, is slowing as homebuyers face record prices and housing finance costs much higher than a year ago, after of a rapid rise in mortgage rates.

“Despite the current gain of more than 2% on the S&P 500 at the time of writing, we doubt we have seen the bottom of the index given that the Fed’s tightening cycle is a long way from end and that the U.S. economy will weaken, ”Oliver Allen, market economist at Capital Economics, told investors in a note.

Investors will be listening intently to clues about the Fed’s plans for possible additional rate hikes when President Jerome Powell speaks to Congressional committees this week. The central bank could consider another mega-rise at its next meeting in July, but Powell said three-quarters of a percentage point increase would not be usual.

In:
• Jerome Powell
• Economy
• Stock Market
• Gas prices
• Inflation