Stock Market Rebounds
Stock Market Rebounds
Wall Street Rebounds: Dow Surges Over 500 Points After Market Rout
Disclaimer: The information provided in this article is for informational purposes only and does not constitute financial advice. Always consult with a professional financial advisor before making any investment decisions. The author does not own any of the stocks mentioned.
Real-time information is available daily at https://stockregion.net
After a tumultuous Monday that saw global stock selloffs and fears of a possible recession, Wall Street made a significant recovery on Tuesday. Major stock indexes, including the Dow Jones Industrial Average, rose over 1%, with the Dow jumping more than 500 points. Investors sought out bargains amid the market turbulence, bringing some relief to the financial markets. A renewed wave of dip buying spurred a rally in stocks after a roughly $6.5 trillion selloff that shook markets around the globe.
Calm Returns to Global Markets
The rebound on Tuesday was notable. All major groups in the S&P 500 rose, with the gauge finishing 1% higher. Following a surge in volatility to start the week, dip buyers emerged to scoop up bargains left after a plunge that sent major benchmarks to technically "oversold" territory. Wall Street’s "fear gauge" — the VIX — was on track for its largest plunge in data going back to 1990. A semblance of calm returned to global markets, following a pullback fueled by weak economic data, underwhelming tech results, stretched positioning, and poor seasonal trends. Buying US shares after a slump of the scale witnessed over the past month has usually been profitable. Since 1980, the US benchmark has generated a median return of 6% in the three months that followed a 5% decline from a recent high.
"The market by any metric is ‘oversold’ and due for a bounce," said Quincy Krosby at LPL Financial. "The lingering question now is whether the concerns that pushed the market into a cascade of selling are alleviated. Pockets of volatility are expected to continue."
As demand for haven assets waned globally, Treasuries fell — with the rise in yields helping smooth a $58 billion auction of three-year notes in afternoon trade. Traders are also moderating expectations of deep Federal Reserve rate cuts this year. Swaps point to around 105 basis points of easing, compared to as much as 150 basis points on Monday.
"The Fed worries about systemic risk in financial markets, not disappointed investors," said David Donabedian at CIBC Private Wealth US. "Thus, the Fed is unlikely to change its course of action due to a stock market correction. Are we headed for a near-term recession, or are markets overreacting? We believe slower growth is unfolding, not a recession."
Key Highlights
S&P 500: Rose to around 5,240.
Dow Jones Industrial Average: Jumped over 500 points.
Nvidia Corp.: Jumped 3.8% to lead gains in chipmakers.
Bloomberg “Magnificent Seven” Index: Rose 1.2%.
Russell 2000: Added 1.2%.
Walt Disney Co.: Rallied on plans to raise prices of its streaming services.
Caterpillar Inc.: Gained on a bullish forecast.
Bond Market and Other Assets
Treasury 10-year yields: Jumped 10 basis points to 3.89%.
Japanese Yen: Slipped after a recent surge that saw an unwind of popular carry trades.
Bitcoin: Climbed.
Oil: Bounced back from a seven-month low.
The wall of worry the market built up over the past few days drove the S&P 500 to the brink of a correction, with a drawdown of almost 8.5% from the highs. While such sharp declines in equity prices are concerning, historical data reminds us that "dips, pullbacks, and corrections of 10% or more" are a normal and healthy part of any bull market. Roughly 94% of the years since 1928 have experienced a pullback of at least 5%, and 64% of years have had at least one 10% correction, according to George Smith at LPL Financial.
"We believe that how common these occurrences are should provide comfort to equity investors, allowing them to be patient, stay invested, and most importantly, to not panic," Smith said.
The recent rebound in the stock market demonstrates the resilience and cyclical nature of the financial markets. Despite the turbulence and concerns of a potential recession, historical patterns suggest that such corrections are not unusual and can often provide opportunities for savvy investors. As always, it's crucial to approach the market with a well-thought-out strategy and professional guidance.
Disclaimer: The information provided in this article is for informational purposes only and does not constitute financial advice. Always consult with a professional financial advisor before making any investment decisions. The author does not own any of the stocks mentioned.
Real-time information is available daily at https://stockregion.net