Stock market jumps after S&P 500’s worst week in two years

US stocks rallied on Tuesday after their worst week since march 2020offering investors a reprieve from a recent series of ups and downs that sent stocks and cryptocurrencies plummeting.

The S&P 500 gained 2.6% on Tuesday, while the Dow Jones Industrial Average added 1.9%, or around 600 points. The Nasdaq Composite Index jumped 3.2%. The US stock market was closed on Mondays for the federal holiday of June 16.

Bitcoin rose alongside other cryptocurrencies, continuing to recoup recent losses after a killer weekend. Bitcoin recently traded at around $21,488, up 5% from its value at 5 p.m. ET on Monday, and around 22% from the recent low of $17,601.58 hit on Saturday, according to data from CoinDesk.

Investor appetite for riskier assets on Tuesday follows a tumultuous week in markets, sparked by the Federal Reserve’s approval of a 0.75 percentage point interest rate hike, largest since 1994. Investors rushed to offload riskier assets amid growing fears that central bankers could push the US economy into a recession. The reference The S&P 500 ended the week at 5.8% lower, its biggest one-week decline in more than two years. Meanwhile, investors await further comments from Federal Reserve Chairman Powell as he testifies before Congress on Wednesday and Thursday.

Investors and analysts say they expect more pain ahead of the markets, although some are still willing to wade in and buy stocks at a discount after a sell-off that sent the S&P 500 down 23% This year. Many pointed to Tuesday’s rally as a rebound from last week’s decline.

“It still looks like a dead cat bounce,” said Viraj Patel, global macro strategist at Vanda Research, referring to a term used to describe a brief market rally. He said investors’ willingness last week to dump stocks in this year’s gaining sectors, including energy and utilities stocks, could be a signal that this year’s pullback has entered its final stages. steps. Still, he said, he thinks the sale “still has some legs to go.”

Tuesday’s bullish mood was accompanied by a sell-off in US government bonds, pushing the yield on US 10-year Treasuries higher. The yield on the benchmark note traded at 3.278%, down from 3.238% on Friday. Yields and bond prices move in opposite directions.

Government leaders and officials have in recent days tried to appease a nation increasingly nervous that an economic slowdown is not guaranteed as central bankers scramble to rein in inflation, which has been high for decades. . President Biden said on Monday he had spoken with Lawrence Summers, a former Treasury secretary, and reiterated that he does not see a recession as inevitable. Federal Reserve Bank of St. Louis President James Bullard also said the economy appears to be on track to more expansion this year.

Still, many market watchers are bracing for an economic slowdown. In a note on Monday, a team of

Goldman Sachs

economists have raised their forecasts of a recession in the United States, fearing that the Fed will feel compelled to react forcefully to inflation data, even if economic activity slows. The team now sees a 30% chance of entering a recession in the next year, up from 15% previously, and a 25% chance of entering a recession in the second year if one is avoided in the first.

Gains in the U.S. stock market were broad-based, with all 11 S&P 500 sectors rising early in the trading session.

Energy stocks outperformed their peers, rising 5.0% as

Diamondback Energy

and

Exxon Mobil

snapped two-week losing streaks and rebounded 6.2% and 5.5%, respectively.

Phillips 66

rose 6.1%, on pace with its largest percentage increase since Dec. 4, 2020. Oil and gas stocks were supported by higher crude oil prices, as West Texas Intermediate rebounded 2 .4% to $110.62 a barrel.

Safe-haven assets fell on Tuesday amid improving investor sentiment.


Photo:

Spencer Platt/Getty Images

Growth stocks, which have been beaten this year, posted gains after the opening bell. Data and software company Palantir Technologies jumped 7.1%, chipmaker Nvidia gained 6.5% and You’re here added 8.6%. Megacap technology companies Amazon.co.uk and

Microsoft

each gained 3.2% and 2.3%, respectively.

Kellogg

shares jumped 3.2% after the opening bell following the company’s announcement of its intention to split into three listed companies.

This week, investors will be watching Fed Chairman Jerome Powell’s testimony before Congress for any further indications of the path of interest rates this year. He is expected to testify Wednesday and Thursday. Data on housing and consumer sentiment are also expected.

For now, Seema Shah, chief strategist at Principal Global Investors, said investors could see value in companies whose stocks have taken a beating this year. However, she said, she expects the market to continue falling once investors begin to see a steady decline in earnings growth.

“I think what you could see is a [modest] rallying through the summer…and as you move into the fall months and the next earnings season, i think a lot of economic data will start to turn and earnings growth will start to turn “, she said. Still, she noted, even now, “the sentiment is deteriorating very quickly.”

Other safe-haven assets fell on Tuesday amid improving investor sentiment. The WSJ Dollar Index, which measures the greenback against a basket of 16 currencies, slipped less than 0.1%. The price of gold fell 0.1% to $1,839.40 per troy ounce.

In commodities, oil prices rose. Brent crude, the international benchmark, rose for a second day, climbing 1.0% to $115.30 a barrel. Last week, oil prices fell amid fears that a possible recession could weigh on energy demand.

Overseas, the pancontinental Stoxx Europe 600 index rose 0.5%. In Asia, exchanges were mixed. Hong Kong’s Hang Seng rose 1.9% and Japan’s Nikkei 225 gained 1.8%, while China’s Shanghai Composite lost 0.3%.

Write to Caitlin McCabe at [email protected]

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