U.S. stocks bounced Tuesday, recovering from a 21-month low and were aiming to snap a five-day losing streak as volatility in global bond and currency markets subsided — at least for now.
How are stock-index futures trading
- The Dow Jones Industrial Average DJIA rose 216 points, or 0.7%, to 29,477.
- The S&P 500 SPX was up 35 points, or 1%, at 3,690.
- The Nasdaq Composite COMP advanced 141 points, or 1.3%, to 10,943.
The Dow entered a bear market on Monday, having fallen 20.5% from its record close on Jan. 4, while the S&P 500 took out its 2022 low from June 16 to end at its lowest since Dec.14, 2020 and the Nasdaq Composite fell 0.6%.
What’s driving markets
The mood across global markets was more composed, encouraging investors to nibble at stocks, bonds and commodities on Tuesday. But analysts were skeptical whether the respite would lead to a sustained bounce.
“Stocks have sold off sharply as the Fed has hiked interest rates aggressively and indicated that there are plenty more to come. Recession fears are growing, which is making stock picking that much harder,” said Fiona Cincotta, senior financial markets analyst at City Index, in a note. While stocks “are edging higher, this is more pause in the market selloff rather than the start of anything more positive.
“The fundamentals remain the same, and a recession is looking increasingly more likely,” she wrote.
Wall Street’s benchmark S&P 500 index was down 5.7% over the last five trading days, as investor concerns about the economic impact of high inflation and rising interest rates resulted in signs of stress in the bond and currency markets.
“Heightened volatility in the currency markets has exacerbated what was already a [difficult] time in most asset classes, with equities reeling from the prospect of a global recession as central banks continue their aggressive monetary policies,” said Richard Hunter, head of markets at Interactive Investors.
Chicago Fed President Charles Evans on Tuesday said rates may need to plateau next year. Loretta Mester, president of the Cleveland Fed on Monday reiterated it was necessary to slow the economy to damp inflation.
However, relative calm returned to the U.K. gilt market BX:TMBMKGB-10Y after its rout Friday and Monday, caused by fears about the government’s fiscal strategy. This in turn has helped steady the pound and halted the rally in the dollar DXY whose recent surge to 20-year highs caused fretting about its impact on U.S. company earnings.
See: A surging U.S. dollar is creating an ‘untenable situation’ for the stock market, warns Morgan Stanley’s Wilson
U.S. Treasury yields, however, continued to climb, with the rate on the 10-year note BX:TMUBMUSD10Y nearing the 4% threshold. Debt and bond prices move opposite each other.
The less febrile tone overall comes amid evidence that parts of the market are exhibiting extreme bearishness.
The S&P 500’s 14-day relative strength index, a closely watched momentum barometer, finished Monday around 25, where any point below 30 is considered in oversold territory. The CBOE Vix index VIX, a measure of volatility known as Wall Street’s fear gauge, remained elevated above 30.
In U.S. economic data Tuesday, the Conference Board said its index of U.S. consumer confidence jumped to a five-month high of 108 in September. Economists polled by The Wall Street Journal had forecast the index to rise to 104.5 from a revised 103.6 in the prior month.
Durable-goods orders fell 0.2% in August, declining less than forecast. Orders minus transportation were up 0.2%, while core durable-gods orders climbed 1.3%.
The Case-Shiller 20-city home price index showed a deceleration to a gain of 16.1% year over year in July from 18.7% in June.
Companies in focus
- Nautilus Inc. NLS said late Monday that a potential sale of the fitness-products company was being considered, part of a broader review of strategic alternatives launched by its board. Shares rose nearly 11%.
- Hertz Global Holdings Inc. HTZ and BP PLC UK:BP BP said Tuesday they have signed a memorandum of understanding for the development of a network of electric vehicle charging stations in North America. Shares of Hertz rose 6.9%, while BP’s U.S.-listed shares rose 2.2%.