US stock indexes recovered early on Tuesday, before falling back into negative territory after three days of penalties.
The S&P 500 recently fell 0.5% in morning trading, a day after the broad index fell 3.2% to its lowest level of the year. The technology Nasdaq Composite fell 0.4%, while the Dow Jones Industrial Average fell about 0.5%. All three indices withdrew in the morning after rising at least 1.6% earlier.
The yield on the benchmark 10-year government securities fell to 2.958% on Tuesday from 3.080% on Monday.
A cocktail of geopolitical risks and economic cross-winds poses the biggest threat to global growth in years and rocking markets. In the United States, rising inflation has prompted the Federal Reserve to raise interest rates, and investors fear the move could drive the economy into recession.
Global markets seem just as problematic. In China, the resurgence of Covid-19 and Beijing’s tough approach to fighting it threaten to revive bottlenecks in the supply chain, which first led to higher inflation. In Europe, the war in Ukraine threatens to keep energy prices high and weighs on the region’s growth.
Early on Tuesday, some investors grabbed stocks that were battered by these headwinds.
“Everyone is looking to see if we’ve hit rock bottom,” said Quincy Crosby, chief equity strategist for LPL Financial. “Instincts are that we haven’t reached the bottom yet.”
Investors were also looking forward to Wednesday’s report on new data on the consumer price index, which is expected to show that inflation rose at a slower pace in April than the previous month, Ms Crosby said.
Shares may reverse later as some investors want to sell their shares during a break in the downturn, Ms Crosby said. It is possible that the sentiment will increase by one penny, she added. In January 2019, a speech by Fed Chairman Jerome Powell signaled that the central bank would be patient with interest rate hikes – reversing the sharp sell-off in the market.
“This is still a market for traders,” she warned.
New York Federal Reserve Chairman John Williams said on Tuesday that he believed the Fed could make a “soft landing” for the US economy while raising interest rates, although unemployment could rise.
“By 2023, it is very likely that you will see growth slow down significantly and the specter of recession is really beginning to emerge,” said Siema Shah, chief strategist at Principal Global Investors. “What we are seeing is the realization that it will be very difficult for the Fed to achieve this soft landing exactly. It’s not impossible, but it will be very difficult to balance. ”
Early earnings on Tuesday are unlikely to change the downward trajectory of the market, Ms Shah said. Investors welcomed signs that the conflict in Ukraine was not escalating and the planned EU embargo on Russian oil could be delayed, she said.
Peloton Interactive fell 11 percent after reporting declining sales and rising losses as the stationary bike maker struggled to return to consumer habits before the pandemic.
Biohaven Pharmaceutical Holding Co. rose more than 70 percent after Pfizer said it would buy the rest of the company for about $ 11.6 billion. AMC Entertainment Holdings rose more than 8 percent after a sharp jump in sales in the first quarter.
Brent crude fell 0.3 percent to $ 105.59 a barrel. Oil prices have risen in recent months, but fears that China’s blockade will reduce demand for raw materials have weakened the rally.
Demand for oil in China is likely to recover sharply as restrictions begin to ease, although the European Union’s proposed ban on Russian oil imports remains overshadowed, said Daniel Hines, senior commodities strategist at ANZ in Sydney.
“Key indicators are still very inclined to an extremely tight market with certainly risks distorted to further reduce supply over the next three to six months,” Mr Hines said.
Bitcoin prices have risen after a sharp sell-off. The world’s largest cryptocurrency traded at $ 31,854.30 on Tuesday, according to CoinDesk. That was up from 17:00 ET on Monday, when it was $ 31,075.70.
Asian stock benchmarks were mixed on Tuesday.
Photo: Kin Cheung / Associated Press
Abroad, the Pan-Continental Stoxx Europe 600 rose 1.5%. In Asia, Japan’s Nikkei 225 closed 0.6 percent lower, Shanghai Composite rose 1.1 percent and Hong Kong’s Hang Seng fell 1.8 percent.
Swedish Match jumped more than 25% after confirming that tobacco company Philip Morris International is in talks to buy it.
“I would expect short-term market volatility to persist in Asia as markets cope with ongoing supply chain challenges, the likelihood of higher inflation and the prospect of more restrictive central bank policies globally,” said Matt Doody. emerging market research. analyst in the global research team of Janus Henderson Investors.
Janus Henderson’s Emerging Markets Fund has shifted its portfolio from long-term rising stocks due to the risks of higher interest rates, Mr Doody said. Duration is a measure of how sensitive bond prices or other financial investments are to changes in interest rates, given the timing of future expected cash flows. Rapidly growing technology stocks, which are valued largely on the basis of long-term projected profits, are longer-term assets than stocks in mature companies.
-Justin Baer contributed to this article.
Write to Will Horner at william.horner@wsj.com and to Dave Sebastian at dave.sebastian@wsj.com
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