Dow jumps 600 points even as experts warn recession could lead to further sell-off in stocks

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Topline

Shares ended higher on Tuesday as the market tried to recover from its worst week since March 2020, despite investors remaining largely jittery over soaring inflation and rising rates leading to a recession .

Highlights

Stocks rebounded somewhat after a heavy week of losses: The Dow Jones Industrial Average rose 2.2%, more than 600 points, while the S&P 500 gained 2.5% and the tech-heavy Nasdaq Composite, 2.5%.

Markets are coming off their worst weekly performance since March 2020, with the S&P 500 falling nearly 6% last week as investors fear aggressive rate hikes from the Federal Reserve could hurt economic growth.

Experts are increasingly warning that the Fed will not be able to pull off a soft landing and will instead plunge the economy into a recession as it strives to raise interest rates further in a bid to fighting inflation for 41 years.

“At least stock markets are starting the week on a positive note,” says Bespoke Investment Group, adding: “Obviously where we are today is a whole different story. . . it doesn’t take much to wipe out a rally in the market these days.

Morgan Stanley’s chief U.S. equity strategist Mike Wilson told TSWT he put the odds of an impending recession at 50%, predicting markets would face a “really tough time” with stocks still expected to drop by 15% to 20% if a slowdown occurs. .

Consumer stocks were among the best performing sectors in the market on Tuesday, with some airline stocks rallying on hopes of a rebound in summer travel, while energy stocks also jumped on the back of soaring oil prices .

Tangent

The price of Bitcoin, meanwhile, rebounded to around $20,000 on Monday after falling below $18,000 over the weekend – a new low for 2022, with the cryptocurrency now sitting around 70% lower. from its records of last November.

crucial quote

“There is no single reason for the rally in equities, and overwhelming opinion dismisses the bull run as nothing more than a dead cat, something that should be faded like all other rally attempts these days. lately,” says Vital Knowledge founder Adam Crisafulli.

Key Context

Markets are still digesting the latest rate hike from the Federal Reserve, which raised interest rates by 75 basis points last Wednesday. It was the biggest central bank rate hike in 28 years, with Fed Chairman Powell hinting at an equally big increase for the central bank’s next policy meeting in July. The S&P 500 is in bearish territory, 23% below its record highs at the start of the year, while the Nasdaq has plunged 33% from its highs of last November. The Dow Jones, meanwhile, fell to its lowest level this year last Friday, falling below 30,000 after falling nearly 5% last week.

To monitor

Investors will be watching Fed Chairman Jerome Powell’s presentation of his semi-annual monetary policy report to Congress on Wednesday and Thursday.

Further reading

Stocks post worst week since March 2020 amid ‘deafening’ recession worries (TSWT)

How to invest during a recession: why experts choose these stocks during turbulent economic times (TSWT)

Dow plunges 700 points as Fed rally evaporates amid fears a recession is ‘inevitable’ (TSWT)

Dow jumps 300 points after Powell said the Fed could raise rates another 75 basis points in July (TSWT)

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