U.S. stocks rose on Tuesday after traders returned from a long weekend, with stocks regaining some losses since the worst week of the March 2020 S&P 500.
The S&P 500 rose 2.45% on its best day in three weeks, ending at 3764.84 and recovering some declines after sinking by 5.8% last week. The Nasdaq Composite rose 2.5 percent to 11,069.30, and the Dow added more than 643 points, or 2.2 percent, to finish at 30,531.77 and reported its best one-day gain since May 4.
Bitcoin (BTC-USD) rose above $ 21,000 after the defeat of the cryptocurrency briefly sent prices below $ 18,000 for the first time since December 2020 over the weekend. Government bond yields rose, with the 10-year reference yield rising to nearly 3.3 percent and US crude oil prices rose 1.5 percent to a high of $ 111 a barrel.
The early recovery of risky assets on Tuesday came as at least a short break amid weeks of heavy sales. The S&P 500 sank in its first bear market since the height of the pandemic last week, and sales widened after the Federal Reserve unleashed a larger than usual 75-point rate hike and signaled it was ready to tighten. additionally at the expense of some economic growth in order to reduce unbridled inflationary pressures.
Federal Reserve Chairman Jerome Powell will address his six-month address to Congress on Wednesday and Thursday, during which he will likely be pressured by lawmakers over the Fed’s actions to reduce inflation and the extent to which they can weigh on the economy. .
Concerns about the sustainability of the economy have already risen sharply. A number of economists from large Wall Street companies have lowered their growth forecasts over the past few days to reflect the increased risk of recession. A recession is usually defined as two consecutive quarters of negative GDP growth, although the final decision is made by the National Bureau of Economic Research (NBER).
“The most likely prospect is very weak growth and persistently high inflation,” Bank of America economists wrote in a note Friday. “We see an approximately 40% chance of a recession next year. Our worst fears about the Fed have been confirmed: they are far behind the curve and are now playing a dangerous game of catching up.
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Others were even more bearish. The base case of Deutsche Bank calls for the recession to begin in the third quarter of 2023, after a slow growth of real GDP of only 1.2% in the US in 2022, compared to 1.8% previously observed. Goldman Sachs economists “now see the risk of a recession as higher and more predictable,” said Jan Hacius, the company’s chief economist, in a new note. He increased his likelihood of recession to 30% from 15%.
Rising risks of a formal recession in the US economy also leave the S&P 500 vulnerable to a larger decline, even after falling more than 22% so far this year. The bear market of the S&P 500 has shrunk since World War II by an average of 29.6% with an average duration of 11.4 months, according to RPL Detrick of LPL Financial. However, when bear markets coincide with recessions, the S&P 500 tends to fall by an average of 34.8% at its lowest bear market level and lasts nearly 15 months.
NEW YORK, NEW YORK CITY – JUNE 16: Traders work on the floor of the New York Stock Exchange (NYSE) on June 16, 2022 in New York. Shares fell sharply in the morning trading as investors reacted to the biggest increase in Federal Reserve interest rates since 1994 (Photo by Spencer Platt / Getty Images)
In motion
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Shares of Kellogg (K) rose after the company announced plans to split into three separate companies. The start-ups will consist of a separate global snack company, a North American cereal company and a clean plant food company.
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Shares of Tesla (TSLA) rose after CEO Elon Musk said the company’s staff would be reduced by only about 3.5% in the short term, or less than previously expected. Musk confirmed that 10% of Tesla’s employees will be laid off over the next three months, but that current hiring will keep the net down to just 3-3.5% of the company’s total workforce, he told Bloomberg News on Tuesday.
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Shares of Coinbase (COIN) jumped more than 12% as cryptocurrency prices jumped after reaching multi-year lows. The cryptocurrency trading platform fell nearly 80% year-to-date until closing on Friday, and the stock traded well below its $ 250 reference price since Coinbase’s direct listing in April 2021.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.
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