May 23, 2022

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US stocks rise, extending last week’s gains

US stocks rise, extending last week's gains

US stocks rose and government bond yields jumped on Tuesday, as investors shook off fears that rising inflation would push the country’s economy into recession.

Tuesday’s moves have sent all three US indexes up at least 2% for the month so far, based on last week’s gains. The Dow Jones Industrial Average rose 238 points, or 0.7%, in early afternoon trade. The S&P 500 jumped about 1% and the Nasdaq Composite added 1.7%.

nike

It advanced 3.5% after the large apparel company announced its revenue That exceeded analysts’ expectations. Financial and technology stocks also rose.

Stock indices closed lower on Monday after Federal Reserve Chairman Jerome Powell said the central bank was Willing to raise interest rates In steps of half a percentage point if necessary to curb inflation. But by Tuesday morning, investors were interpreting Powell’s comments as a vote of confidence in the outlook for the economy.

“The message that came out of [Fed] Last week’s meeting is that they will stress [monetary policy] “But the US economy is resilient enough to handle that,” said Howe Roberts, head of analytics at Quant Insight, a data analytics company. “The stock market chose to emphasize the economic resilience part.”

In the US Treasury market, the sell-off in government bonds intensified, sending the 10-year US Treasury yield to 2.370% from 2.315% on Monday. The yield on the benchmark paper is now near its highest level since May 2019, before the Covid-19 pandemic turned financial markets on its head. Yields rise when bond prices fall.

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In energy markets, Brent crude futures, the international benchmark, fell 0.6% to $115 a barrel. Last week, Brent crude prices fell below $100 before reversing and moving higher. Support for an EU-wide ban on the purchase of Russian oil It grows within the block, which increases the possibility of more fluctuations in the future.

Stocks, bonds, commodities and currencies were hit hard by volatility last month as investors tried to assess the economic fallout from Russia’s war in Ukraine. Many investors now fear that war could do just that maintain inflation And hinder economic growth in the United States and Europe.

But this week, investors faced a new curve ball when Powell, speaking on Monday, hit a tougher tone than he used when Raising interest rates from nearly zero last week. Emphasizing the uncertainty facing the central bank, he said the Fed would switch to a more restrictive stance if necessary.

These comments prompted some analysts and investors to reassess interest rate expectations. Goldman Sachs economists said in a note after Powell’s comments that they now expect increases of half a percentage point at the Fed’s May and June meetings. That compares with expectations of quarter-percentage point increases in both previous meetings.

Traders worked on the floor of the New York Stock Exchange on Monday.


Photo:

Brendan McDermid/Reuters

Monday’s comments added to investor concerns that the Federal Reserve may tighten more quickly at a time when the economy is slowing. “The big variable now is the economic growth side of things,” said Mr. Roberts.

Many investors keep a close eye on the so-called yield curve, which measures the difference between short and long-term interest rates, and is often seen as a strong indicator of sentiment toward economic growth prospects. Recently, the gap between the yields on short-term and long-term US Treasury bonds shrinkraising fears that the bond market is close to signaling a possible recession.

The two-year Treasury yield – which is particularly sensitive to changes in monetary policy – rose to 2.187% on Tuesday from 2.132% on Monday.

On Tuesday morning, investors analyzed data from the Federal Reserve in Richmond showing that manufacturing activity in the US mid-Atlantic region rebounded in March after a slight growth in February.

Bank shares rose, tracking similar moves in Europe. Financial stocks helped lead the early gains for the S&P 500, with the sector up about 1.6%.

Wells Fargo

It jumped 4.4%, while Signature Bank rose 3.8%. in Europe,

Société General

Advance 0.9% and

German Bank

It jumped 3.6%.

The inversion of the US Treasury yield curve has been seen as a warning sign of a recession for decades, and it looks like it is about to light up again. WSJ’s Dion Rabouin explains why an inverted yield curve can be so reliable in predicting a recession and why market watchers are talking about it now. Illustration: Ryan Trevis

The yield curve is likely to be sharp today,” said Jack Aplin, chief investment officer at Cresset Capital. “It’s good for the banks, and maybe more optimistic about the economy.”

Nike’s move made her among the biggest naysayers. Telecom and technology shares also rose.

etsy

It rose 5.6% while

Match group

It jumped 5.2%.

Amazon.com

It was up more than 2%, up for the sixth consecutive day, according to market data from Dow Jones. It’s up more than 16% over that period.

“Nike is the ultimate global company, selling and exporting all over the world,” said Mr. Abelin. “It’s a great metric, and they have eased a lot of investor concerns.”

shares

octa

It fell 7.2% after a hacking group posted screenshots claiming to have gained access to official Okta.com and other systems. The company said Tuesday that A preliminary investigation found no evidence of any malicious activity, adding that the screenshots were likely related to a security incident that occurred in January.

Bitcoin is up about 3.6% from the 5pm ET level on Monday to trade around $42,685. The price of the cryptocurrency has fluctuated sharply over the past month, but it has been trading pretty much above $40K since the middle of last week.

In Europe, the Stoxx Europe 600 continental index rose 0.5%, putting it on course to rise for the fifth consecutive session.

In Asia, the major indices also closed largely higher. Hong Kong’s Hang Seng is up 3.2%, while Japan’s Nikkei 225 is up 1.5%. China Shanghai Composite advanced 0.2%.

Write to Caitlin McCabe at [email protected] and Justin Baer at [email protected]

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