Dow jumps 600 points as stocks bounce back from worst week in over two years
(CNN) — U.S. stocks roared back Tuesday in the first day of trading since last week’s selloff.
The Dow closed up 641 points, or 2.1%, and was up over 700 points in afternoon trading. The S&P 500 was up 2.5% and the Nasdaq was also 2.5% higher.
Last week was the market’s worst week since March 2020.
The holiday-shortened week swung to the upside in Tuesday trading as oil prices and other commodities appeared to swing back in price, increasing investor sentiment and the hope that the Federal Reserve’s actions to rein in inflation without causing a near-term recession may be working.
Oil prices gained a bit Tuesday, but the benchmark Brent crude now sits about $10 below its recent highs. Gas prices have dipped below $5 a gallon, a small relief. The price of iron ore and copper also have fallen. President Joe Biden, meanwhile, will fly to Saudi Arabia this week to discuss boosting energy production.
Bitcoin rose back above $21,000 after a major drop in cryptocurrency sent prices below $18,000 over the weekend. Treasury yields also climbed, the 10-year yield increased to 3.3%.
Tuesday’s comeback was broad, with nearly all members of with the S&P 500 seeing upward growth.
Large bounces are common during bear markets. The S&P 500 has grown by more than 2% on 10 other occasions since its last peak in January but has given up the gains and traded lower each time, according to Sam Stovall, chief investment strategist at CFRA Research.
U.S. stocks rose tepidly on Friday but still managed to log large losses last week after the Federal Reserve announced that it would increase interest rates by three-quarters of a percentage point, the largest hike in 28 years, in an attempt to tame inflation rates. Fed Chair Jerome Powell told Americans on Wednesday that he wasn’t sure if it would be possible to lower inflation without dampening the US economy.
“I think that what’s becoming more clear is that many factors that we don’t control are going to play a very significant role in deciding whether that’s possible or not,” he said.
The S&P 500 lost almost 6% last week, posting its worst week on record since 2020. The Dow plummeted 1,504 points, or about 5%.
The Fed is in the spotlight again this week. Powell will appear before the Senate Banking Committee on Wednesday and the House Financial Services Committee on Thursday as part of his semi-annual testimony to Congress about the Fed’s work. With little other economic or earnings data, investors will likely look to his testimony to gauge their sentiment going forward.
U.S. stocks have fallen into a bear market, tumbling more than 20% since hitting a record high January 3. But stocks may have plenty more room to fall — particularly if economists’ predictions come true and the US economy slides into a recession.
Recessions are not kind to investors. Bear markets during recessions have historically been longer and deeper than bear markets that weren’t associated with economic downturns, notes Stovall. Since World War II, stocks have fallen 28% in bear markets without recessions — and 36% in those during recessions.
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