Stocks begun rebounding Tuesday, after steep declines put the market at new lows. Bond yields also ticked lower.
Futures for the
Dow Jones Industrial Average
climbed 190 points, or 0.6%.
futures signaled a start 0.7% into the green, with the technology-heavy
poised to rise 1.1%.
This comes after all three major indexes have sold off sharply for the past three days, landing them at new closing lows for the year. The S&P 500 has fallen 16% for the year through Monday’s close, as the Federal Reserve lifts interest rates and reduces its bondholdings to combat high inflation. Those are moves that will likely slow down economic growth and have already caused a selloff in bonds, lifting their yields. Lockdowns in China are also restricting companies around the globe from accessing supplies, yet another factor bringing costs higher, a threat to profit margins.
Tuesday, stocks are getting a slight boost from lower bond yields. The 10-year Treasury yield dropped to 3.018% and is down from a pandemic-era closing high of 3.13% Friday, but still up from 1.51% to end 2021. The problem is that higher bond yields make future profits less valuable, thus lowering stock valuations. So the stock market is encouraged to see the 10-year yield shows signs—for the moment—that it will stop surging.
Tuesday’s early trading may feel encouraging, but the stock market is nowhere near out of the woods. Recently, its declines have landed it at new lows for the year, while its mini-rallies have landed it at lower peaks—before the next selloff occurs. That signifies that market participants have become less willing to buy stocks at higher levels as their confidence in the economy and the market outlook has waned. The market may just not be finished reflecting the risks to the economy.
“Although [market] pullbacks are common, investors should be more cautious now as the Federal Reserve embarks on what will be a lengthy effort to reduce stimulus from the economy,” wrote Richard Saperstein, chief investment officer at Treasury Partners.
Overseas, the pan-European
was up 1% but Hong Kong’s
Hang Seng Index
played catch-up to Wall Street’s Monday malaise, losing 1.8%.
“Stock markets in Europe and U.S. futures are attempting to rally this morning but we still question whether the bottom is in,” said Neil Wilson, an analyst at broker Markets.com.
The digital asset space has also fared poorly. Bitcoin, the largest cryptocurrency, was down near 5% over the past 24 hours to $31,500, having traded around $36,000 last Friday before beginning to slide over the weekend.
In the depths of Tuesday trading, Bitcoin broke below the key $30,000 barrier, a level it hasn’t consistently traded below since late 2020. “Bitcoin is a great barometer for risk now and we see its decline as evidence of significant deleveraging,” said Wilson.
Here are five stocks on the move Tuesday:
After notching dramatic declines on Monday, stocks sensitive to the price of Bitcoin were recuperating slightly.
(COIN), which reports earnings after the bell, rose near 3% after plunging 20% in the previous session, with digital-payments group
(SQ) up 1% after a 13% fall on Monday.
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