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U.S. stocks tumbled overnight after a rally on Friday as fresh economic data dampened investor expectations for big interest rate hikes from the Federal Reserve.
Stocks rose last week as pressure from rising Treasury yields eased somewhat and investors speculated that the Federal Reserve might not have to be so aggressive in interest rate hike than previously thought as it struggled to control inflation. This gave Wall Street a breather after its recent slumps.
Markets seemed indifferent to the possibility that Russia could have defaulted on its foreign debt for the first time since the Bolshevik Revolution of 1917, further alienating the country from the global financial system amid its war in Ukraine.
Russia faced a deadline Sunday evening to meet a 30-day grace period on interest payments originally due on May 27. But it might take time to confirm a fault.
Positive inflation news helped lift stocks in New York on Friday, but the boost in sentiment may prove fleeting, “largely because the downward trend in equity indices remains intact and we have seen previous examples of a single event in inflation, the economic outlook, and central bank policies bringing back market jitters and reversing bearish buying sentiments,” said IG’s Jun Rong Yeap in a comment.
The S&P 500 posted a 6.4% gain for the week, erasing the sharp loss it suffered a week earlier, although it is still nearly 20% below its record set at the start of this week. year.
On Friday, he gained 116.01 points to 3,911.74. The Dow Jones Industrial Average rose 2.7% to 31,500.68, while the tech-heavy Nasdaq ended up 3.3% at 11,607.62.
Stocks of small companies also rallied. The Russell 2000 rose 3.2% to 1,765.74.
To combat extremely high inflation, central banks raise interest rates and take other actions that hurt investment prices and could slow the economy enough to cause a recession.
But the pressure from rising Treasury yields has eased somewhat, with investors speculating the Federal Reserve may be able to raise interest rates more modestly than previously thought.
Meanwhile, Asian stocks rose on Monday.
Hong Kong’s Hang Seng index led the regional gains, jumping 2.5% to 22,249.47, while Tokyo’s Nikkei 225 gained 1.5% to 26,886.36. In South Korea, the Kospi climbed 1.8% to 2,408.17. Australia’s S&P/ASX 200 gained 1.9% to 6,704.30 while the Shanghai Composite Index rose 0.8% to 3,377.90.
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