Wall Street Rebounds with Strong Gains, Ending S&P 500's 3-Day Slump

Wall Street rebounds with strong gains

STORY: Wall Street's main indexes rebounded Tuesday, as investors jumped back into the market a day after a dramatic sell-off. The Dow gained three-quarters of a percent, and the S&P 500 and Nasdaq each added one percent. In recent comments, Federal Reserve policymakers have pushed back against the idea that weaker-than-expected July jobs data means the economy is headed for a recession. Bill Fitzpatrick, portfolio manager at Logan Capital Management, agrees with that sentiment - at least for now. "So with regards to a potential recession, I would first point out that the U.S. economy is still growing at a two-and-a-half percent clip. So as of today, we're in no danger of a near-term recession. That being said, a number of indicators would suggest that our economy is not only weakening but will continue to weaken. And remember the impact of higher interest rates takes place on a very significant lag. It's not six months, it's more 12, 18, perhaps 24 months and we're starting to see that work its way into the U.S. economy." Traders are pricing in a 75% chance the Fed will cut rates by 50 basis points at its next policy meeting in September, according to the CME Group's FedWatch Tool. Though later this month Federal Reserve Chair Jerome Powell could give an indication of where the central bank stands during his speech at the annual meeting of central bank officials in Jackson Hole, Wyoming. Stocks on the move Tuesday included AI darling Nvidia, up nearly 4%, giving the S&P and Nasdaq their biggest boosts. Uber shares jumped 11% after the ride-sharing and food delivery provider beat Wall Street estimates for second-quarter revenue and core profit, helped by steady demand for its services. And Caterpillar gained 3% after beating analysts' estimates for second-quarter profit, as higher prices on its larger excavators and other equipment countered moderating demand in North America.

Wall Street rebounds as S&P 500 ends 3-day slump

The Dow Jones Industrial Average rose 294 points, or 0.8%, while the Nasdaq composite gained 1%. Stocks of all kinds climbed in a mirror opposite of the day before, from smaller companies that need U.S. households to keep spending to huge multinationals more dependent on the global economy. Stronger-than-expected profit reports from several big U.S. companies helped drive the market. Kenvue, the company behind Tylenol and Band-Aids, jumped 14.7% after reporting stronger profit than expected thanks in part to higher prices for its products. Uber rolled 10.9% higher after easily topping profit forecasts for the latest quarter. Caterpillar climbed 3% after the maker of heavy machinery reported stronger earnings than expected. The whiplash moves for financial markets globally have been the result of several technical factors, not just worries ignited by several weaker-than-expected reports on the U.S. economy, in what strategists at Barclays called "a perfect storm" for causing extreme market moves. One is centered in Tokyo, where a favorite trade for hedge funds and other investors began unraveling last week after the Bank of Japan made borrowing more expensive by raising interest rates above virtually zero. That scrambled trades where investors had borrowed Japanese yen at low cost and invested the cash elsewhere around the world. The resulting exits from those investments may have helped accelerate the declines for markets around the world. Japan's Nikkei 225 jumped 10.2% Tuesday to claw back much of its 12.4% sell-off the day before, which was its worst since the Black Monday crash of 1987. Stocks in Tokyo rebounded as the value of the Japanese yen stabilized against the U.S. dollar following several days of sharp gains. "The speed, the magnitude and the shock factor clearly demonstrate" how much of the moves were driven by how traders were positioned, according to the strategists at Barclays led by Stefano Pascale and Anshul Gupta. Still, some voices along Wall Street are continuing to urge caution. Barry Bannister, chief equity strategist at Stifel, is warning more drops could be ahead because of a slowing U.S. economy and sticky inflation. He's forecasting both will be worse in the second half of this year than what much of Wall Street expects, while saying a measure of how expensive the U.S. stock market is still looks "frothy" when compared with bond yields and other financial conditions. The stock market's "dip is not a blip," he warned in a report, and called it "too soon to jump back in." He had been predicting a coming "correction" in U.S. stock prices for a while, including an acknowledgement in July that his initial call was early. That was a couple days before the S&P 500 set its latest all-time high and then began sinking. While fears are rising about a slowing U.S. economy, it is still growing, and many economists see a recession in the next year or so as unlikely. The U.S. stock market is also still up a healthy amount for the year so far, and the Federal Reserve says it has ample room to cut interest rates to help the economy if the job market weakens significantly. The S&P 500 has romped to dozens of all-time highs this year and is still up nearly 10% so far in 2024, in part due to a frenzy around artificial-intelligence technology. Critics have been saying that euphoria has sent stock prices too high in many cases. They've pointed in particular to Nvidia, Apple and the other handful of Big Tech stocks in the "Magnificent Seven" that were the main reason the S&P 500 set so may records this year. They helped overshadow weakness across other areas of the stock market, which were struggling under the weight of high interest rates. A set of underwhelming profit reports recently, kicked off by Tesla and Alphabet, added to the pessimism and dragged Big Tech stocks lower. Nvidia dropped nearly 19% from the start of July through Monday on such concerns, but it rose 3.8% Tuesday and was one of the strongest forces pushing upward on the market. Apple, though, slipped another 1% and was the heaviest weight on the market. All told, the S&P 500 rose 53.70 points to 5,240.03. The Dow added 294.39 to 38,997.66, and the Nasdaq gained 166.77 to 16,366.85. In the bond market, Treasury yields climbed to claw back some of their sharp drops since April, which were driven by rising expectations for coming cuts to interest rates by the Federal Reserve. The yield on the 10-year Treasury rose to 3.88% from 3.78% late Monday. It had briefly dropped below 3.70% during Monday when fear in the market was spiking and investors were speculating the Federal Reserve could even have to call an emergency meeting to cut interest rates quickly. ___ AP Business Writers Elaine Kurtenbach and Matt Ott contributed.

S&P 500, Nasdaq end with strong gains, rebounding from global market sell-off

The S&P 500 and Nasdaq rose by 1% as investors returned following a major sell-off. Strong comments from Federal Reserve officials alleviated recession concerns. Traders expect rate cuts in the next Fed meeting. Nvidia boosted indices, while Uber and Caterpillar reported positive earnings. The Nasdaq is up 9% in 2024.The S&P 500 and Nasdaq ended 1% higher on Tuesday as investors jumped back into the market a day after a dramatic sell-off, with recent comments by Federal Reserve officials easing U.S. recession worries. The Dow rose as well, but all three major stock indexes pared gains heading into the close and ended well off their highs of the day. U.S. central bank policymakers have pushed back against the idea that weaker-than-expected July jobs data means the economy is headed for a recession, but they have also warned that the Fed will need to cut interest rates to avoid such an outcome. Stocks had sold off as weak economic data raised worries of a U.S. recession. Traders are pricing in a 75% chance the Fed will cut rates by 50 basis points at its next policy meeting in September, and a 25% chance of a 25 basis point reduction, the CME Group's FedWatch Tool showed. All major S&P 500 sectors ended higher, with real estate and financials up the most. Technology megacap Nvidia rose nearly 4%, giving the S&P 500 and Nasdaq their biggest boosts. "The market had just gotten top heavy, but it did reprice a decent amount, particularly the Nasdaq, and people are coming back to the idea that with lower rates it should provide a support for stocks," said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey. The Dow Jones Industrial Average rose 294.39 points, or 0.76%, to 38,997.66, the S&P 500 gained 53.7 points, or 1.04%, at 5,240.03 and the Nasdaq Composite advanced 166.77 points, or 1.03%, to 16,366.86. The Nasdaq Composite is still up 9% so far in 2024, driven earlier in the year by strong earnings and optimism over artificial intelligence. "While (recent) earnings were good, in many cases they weren't great," Meckler said. have been stretched. The S&P 500 was last trading at 20 times forward 12-month earnings estimates, compared with its long-term average of 15.7, LSEG data showed. Recent market concerns were exacerbated as investors wound down yen-funded trades, used to finance acquisition of stocks for years, after a surprise Bank of Japan rate hike last week. The next big Fed event is Chair Jerome Powell's speech at the Jackson Hole, Wyoming, on Aug. 22-24. Uber shares jumped 11% after the ride-sharing and food delivery provider beat Wall Street estimates for second-quarter revenue and core profit, helped by steady demand for its services. Caterpillar gained 3% after beating analysts' estimates for second-quarter profit, as higher prices on its larger excavators and other equipment countered moderating demand in North America. Volume on U.S. exchanges was 13.52 billion shares, compared with the 12.48 billion average for the full session over the last 20 trading days. Advancing issues outnumbered declining ones on the NYSE by a 2.59-to-1 ratio; on Nasdaq, a 1.93-to-1 ratio favored advancers. The S&P 500 posted 12 new 52-week highs and seven new lows; the Nasdaq Composite recorded 31 new highs and 144 new lows.