Stocks surge on Tuesday as Wall Street sees the most breathtaking move from the manic Monday’s reversal course.
S&P 500 rose 1.8% in midday trading after report showed inflation is still high, but is on the decline.Shares of small and medium-sized banks have recovered some of their earlier plunges sparked by concerns Customers can withdraw all cash. Treasury yields soared, correcting historic declines.
At 11:55 am ET, the Dow Jones Industrial Average was up 435 points, or 1.4%, to 32,248. Meanwhile, the Nasdaq Composite was up 2.3%.
A week ago, Wall Street expected Tuesday’s report on inflation to be the most important data of the week, if not the month. The concern at the time was that inflation could remain stubbornly high, forcing the Federal Reserve (Fed) to increase the pace of rate hikes again.
Such rate hikes can slow the economy and keep inflation down, but they increase the risk of a recession. later. It also affects the prices of stocks, bonds, and all kinds of investments.
Inflation at the consumer level was 6% year-on-year in February, according to a report on Tuesday. This is in line with economists’ expectations, slowing from his 6.4% inflation rate in January but still well above the Fed’s target.
Under normal circumstances, the scale of rate hikes could actually increase. The problem for the Federal Reserve is that it also faces a banking system that may already be cracked by all the rate hikes since last year, the fastest in decades. 2nd and his 3rd largest bank failure In US history, both have come since Friday.
“The Fed is stuck between a rock and a hard place,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments.
“Inflation has met expectations, but it is still uncomfortably hot. Financial stress is severe. Combined with a stern warning that it could be,” he said.
He said the Fed has tools other than raising rates. Among them is the possibility that the Fed will adjust the speed at which it scales back its large bond investment. This is an action that effectively tightens the screws in the financial system.
Easing monetary policy could give the banking system and the economy more breathing room, but it could also give inflation more oxygen.
Traders rushed to bet on Monday that the Fed might decide to keep rates unchanged at its next meeting, rather than accelerating to a 0.50% rate hike as thought a week ago. Following inflation data, the bet has fallen sharply after gaining 0.25 points later in the month, according to CME Group data.
Stocks across the financial industry rose on Tuesday, recovering some of the earlier sharp declines. First Republic Bank surged 48.3% after he plunged 67.5% over the past three days. Zions Bancorp. was up 14.3%, KeyCorp was up 13.9% and Charles Schwab was up 9%.
Among other big companies on Wall Street, Facebook’s parent company has risen 5.9% after saying it expects costs to be lower this year than previously forecast. Meta Platforms is cutting workers and eliminating recruitment to keep costs down.
U.S. government announces plans late Sunday to strengthen confidence in the banking system, following the failure of Silicon Valley Bank on Friday and signing banks on Sunday. Banks are struggling as rising interest rates reduce the value of their investments.
Some of the wildest action has taken place in the bond market, with two-year US Treasury yields plummeting by about 0.5% on Monday. This is a move of historic magnitude for the bond market. Yields plummeted as investors piled into investments deemed safe and expectations of future rate hikes by the Fed gradually receded.
The 2-year yield rose from 4.02% to 4.34% at the end of Monday. This is also a big move.
The 10-year yield jumped from 3.55% to 3.64%. Helps set interest rates for mortgages and other important loans.
European markets also rebounded after a broader setback in Asia.
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Contributed by AP Business Writers Yuri Kageyama, David McHugh and Matt Ott.
