US stocks rose on Tuesday, relief after five straight days of losses.
The Dow Jones Industrial Average, which slipped into a bear market on Monday, rose 0.7%. The broad S&P 500, which closed Monday at its lowest level for the year, rose 1.1%.
The tech-heavy Nasdaq Composite rose 1.6%.
Tuesday’s rebound barely erases a brutal year for financial markets. Both stocks and bonds have fallen sharply this year, an unusual tandem that reflects how unsettled many investors are feeling. The Dow, S&P and Nasdaq are all on course for their worst first nine months of a year since 2002.
Persistently high inflation has rocked markets since the beginning of the year. In response, the Federal Reserve has hiked interest rates to cool the economy, stoking fears that the central bank will plunge the US into recession. Some investors hoped this summer that rate hikes might be coming to an end, and stocks rallied briefly. Now investors are grappling with the notion that bigger rate hikes – and weaker global economic growth – will continue for quite some time.
Despite Tuesday’s bullish move, traders and investors were not ready to call a bottom.
“The stock market is watching for this steady rise in terminal interest rates in the US,” said Charles Diebel, head of fixed income at Mediolanum International Funds. “The more the final interest rate rises — which is necessary to deal with the threat of inflation — the greater the economic downturn will be.”
“Historically, when the financial conditions are like that, something always breaks,” he said.
As markets react to interest rate hikes and the threat of a recession, stocks have entered the bear market. WSJ’s Gunjan Banerji explains what it takes to propel stocks back into a bull market and why it’s hard to predict when they will reverse. Image: Jacob Reynolds
Tuesday’s data showed companies reduced orders for durable goods for the second straight month. House prices continued to post large year-over-year gains, but the pace of that growth has slowed. Real estate prices fell month by month.
Bond prices continued to fall, pushing yields higher. The yield on the 10-year government bond rose to 3.891%. It hit 3.878% on Monday, its highest level since 2010.
Traders worked on the floor of the New York Stock Exchange on Monday.
Photo: Portal
In commodity markets, oil prices rebounded after falling to their lowest levels since January on Monday. Brent crude, the international oil benchmark, rose 1.9% to $84.39 a barrel.
Global equity markets also largely recovered. In Europe, the Stoxx Europe 600 rose slightly by 0.6%.
In Asia, stocks mostly closed higher. Japan’s Nikkei 225 Index rose 0.5%, while China’s Shanghai Composite rose 1.4%. Hong Kong’s Hang Seng Index ended the day almost unchanged.
Write to Will Horner at [email protected]
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