Tuesday saw a 1% increase in the S&P 500 and Nasdaq as investors returned to the market after a sharp sell-off. Concerns of a recession have subsided as a result of recent remarks made by Federal Reserve officials, encouraging hope.
Despite all three of the main stock indexes pulling down at the end of trade and closing well below their session highs, the Dow witnessed gains as well.
Policymakers at the Federal Reserve allayed concerns that July’s jobs numbers, which were lower than anticipated, would portend a recession. They did, however, issue a warning that to prevent such a fall in the economy, interest rate reductions might be required.
Earlier, poor economic data that raised fears of a recession caused stocks to plummet. However, according to the CME Group’s FedWatch Tool, traders are still optimistic, pricing in a 75% chance of a 50 basis point rate drop at the Fed’s upcoming policy meeting in September. A 25 basis point cut has a 25% chance of occurring as well.
Financials and real estate led the way as all of the main S&P 500 sectors finished the day higher. With a nearly 4% increase, tech giant Nvidia gave the S&P 500 and Nasdaq the most lift.
The Dow Jones Industrial Average reached 38,997.66, up 294.39 points, or 0.76%. By closing at 5,240.03, the S&P 500 gained 53.7 points, or 1.04%, while the Nasdaq Composite increased by 166.77 points, or 1.03%, to 16,366.86.
Strong earnings and anticipation for artificial intelligence have kept the Nasdaq Composite up 9% in 2024, despite recent swings. According to LSEG data, the S&P 500 is currently trading at 20 times future 12-month earnings forecasts, which is higher than its long-term average of 15.7. This indicates that valuations are stretched.
Investors unwinding yen-funded deals, a long-standing tactic used to finance stock buys, contributed to market anxiety after the Bank of Japan unexpectedly raised interest rates last week.
All eyes will be on Fed Chair Jerome Powell when he speaks at the Jackson Hole conference in Wyoming on August 22–24.
Due to consistent demand for its ride-sharing and food delivery services, Uber exceeded Wall Street projections for second-quarter revenue and core profit, sending its shares skyrocketing 11% in business news.
Moreover, Caterpillar was pleased, increasing by 3% after exceeding analysts’ projections for second-quarter earnings. Its larger excavators and other equipment are more expensive, offsetting the slowing demand in North America.
13.52 billion shares were traded on US markets during the last 20 trading days, which is a decrease from the average of 12.48 billion shares. On the NYSE, advancers outnumbered declining issues by a ratio of 2.59 to 1, while on the Nasdaq, advancers led by a ratio of 1.93 to 1.
While the Nasdaq Composite had 31 new highs and 144 new lows, the S&P 500 saw 12 new 52-week highs and seven new lows.
Although there are still obstacles to overcome, Wall Street appears to be feeling cautiously optimistic since the market has recovered and there have been encouraging earnings reports.
