Wall Street stocks rebounded on Tuesday and U.S. Treasury yields fell while oil prices tumbled amid fears about inflation and slowing economic growth around the world.
U.S. Treasuries rallied, with the yield on the benchmark 10-year note tumbling from more than a three-year high to below 3% as the market reassessed the inflation outlook a day before U.S. consumer price index (CPI) data is released.
U.S. crude oil futures dipped below $ 100 a barrel to their lowest level in two weeks as the demand outlook was clouded by coronavirus lockdowns in China and growing recession concerns, while a strong dollar made crude more expensive for buyers using other currencies.
Markets have been volatile across asset classes due to a combination of surging inflation and fears that monetary tightening aimed at slowing price increases would cause a slowdown in global economic growth.
Last week, central banks in the United States, Britain and Australia raised interest rates and investors girded for more tightening as policymakers fought soaring inflation. [.N]
After dipping into the red for about two hours, the S&P was last up solidly on the day in contrast with Monday’s furious sell-off. Technology, the market’s biggest growth sector, was leading gains as investors reacted to falling bond yields.
“If we’ve seen the worst of the rate of change from long-term interest rates, it may create room for equities to do a little bit better,” said Sameer Samana, Senior Global Market Strategist at Wells Fargo Investment Institute in St. Louis.
The Dow Jones Industrial Average rose 14.43 points, or 0.04%, to 32,260.13, the S&P 500 gained 26.46 points, or 0.66%, to 4,017.7 and the Nasdaq Composite added 183.51 points, or 1.58%, to 11,806.75.
The pan-European STOXX 600 index closed 0.68% higher while MSCI’s gauge of stocks across the globe was last up 0.31%.
Matthew Miskin, co-chief investment strategist at John Hancock Investment Management, was reassured by policy makers including Cleveland Federal Reserve Bank President Loretta Mester. While Mester said unemployment may increase and growth may slow, she added that tightening should not cause a “sustained downturn.”
“They’ve been so hawkish so any slight move off that the market wants to sniff that out,” said Miskin. “Sentiment wise, a lot of people are looking for capitulation. The dots aren’t completely connecting yet for that.”
The U.S. dollar was choppy on Tuesday as it held near a two-decade high ahead of a key reading on inflation that could provide insight on the Fed policy path.
The dollar index rose 0.203%, with the euro down 0.23% at $ 1.0531. The yen weakened 0.09% to 130.38 per dollar, while sterling was last trading at $ 1.2322, down 0.07% on the day.
Oil prices fell in volatile trade as the market balanced impending European Union sanctions on Russian oil with demand concerns related to coronavirus lockdowns in China, a strong dollar and growing recession risks. [O/R]
U.S. crude recently fell 3.41% to $ 99.57 per barrel and Brent was at $ 102.30, down 3.44% on the day.
“There probably is some demand destruction and sticker shock at these levels. The other part is what’s going on in China. The longer that continues the more it takes pressure off too tight inventory levels,” said Wells Fargo’s Samana.
Earlier data showed China’s export growth slowed to its weakest in almost two years, as the central bank pledged to step up support for the slowing economy.
Benchmark 10-year notes last rose 26/32 in price to yield 2.9771%, from 3.079% late on Monday.
Spot gold dropped 0.5% to $ 1,844.31 an ounce. Elsewhere, Bitcoin was up 5% after earlier falling to its lowest level since July 2021. Tuesday’s gain recovered some losses from its 11.8% plunge on Monday.
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