Dow jumps 600 points, S&P 500 adds 2.5% in comeback from worst weekly loss in 2 years

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Stocks rose Tuesday following a brutal week as investors assessed a more aggressive Federal Reserve and rising chances of a recession.

The Dow Jones Industrial Average jumped 641.47 points, or 2.15%, to 30,530.25 in its best day for the month. The S&P 500 also climbed 2.45% to 3,764.79, making it the index’s best day in June. The Nasdaq Composite popped 2.51% to 11,069.30. U.S. stock markets were closed Monday for Juneteenth.

Those moves followed last week’s declines in which the S&P 500 posted its worst week since 2020. Many investors fear that a rebound amid growing fears of a recession may be short-lived, though others expect that equities may be oversold after more accurately pricing in inflationary pressures.

The comeback was broad-based with 441 stocks of the S&P 500 gaining.

“The outstanding question is whether this is simply a bounce or the bottom,” said Sam Stovall, chief investment strategist at CFRA Research. “I think that this could certainly be a bounce but not the bottom because the one missing ingredient is a fear-based capitulation sell-off.”

Stovall thinks the S&P 500 could fall to around 3,200 before recovering, or a more than 30% decline from its record high.

Big bounces of this sort have been commonplace during this bear market. The S&P 500 has popped more than 2% on 10 other occasions since this bear began at the start of January, only to give up that gain and trade lower. Some investors have doubts that this bounce will be the one that marks the turn, especially with no apparent news or catalyst driving it.

S&P 500’s 2% gains during current bear market

Date % Change
4-May 2.99%
9-Mar 2.57%
28-Apr 2.47%
27-May 2.47%
Tuesday 2.45%
28-Jan 2.43%
13-May 2.39%
16-Mar 2.24%
25-Feb 2.24%
15-Mar 2.14%
17-May 2.02%

Energy was the best-performing sector in the S&P 500, up 5.1%, following a surge in oil prices. Brent crude futures traded 0.46% higher at $114.65 per barrel. West Texas Intermediate, the U.S. oil benchmark, gained nearly 1% to $110.65 per barrel.

Shares of Diamondback Energy jumped 8.2% and Exxon Mobil rose 6.2%. Shares of Schlumberger and Phillips 66 gained about 6%. Shares of Halliburton climbed roughly 5.9%.

Mega-cap tech stocks also led gains. Shares of Google-parent Alphabet jumped 4.1%. Shares of Apple rose about 3.3% and Amazon gained 2.3%.

Chip stocks posted gains with shares of Nvidia rising 4.3%, KLA jumping 4.9% and Advanced Micro Devices climbing 2.7%.

Elsewhere, Kellogg’s stock price rose nearly 2% after the company said it would split into three separate companies.

Meanwhile, the yield on the benchmark 10-year Treasury note continued to march higher. Yields move inversely to prices.

The major averages suffered their 10th losing week in 11 last week on fears that the central bank will hike rates aggressively to tame inflation at the risk of causing an economic downturn. The S&P 500 dropped 5.8% last week for its biggest weekly loss since March 2020.

Last week, the blue-chip Dow dipped below 30,000 for the first time since January 2021, losing 4.8% for the period. The tech-heavy Nasdaq Composite slipped 4.8%.

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The steep drop in equities appeared to signify the further weakening in investor confidence in the economic outlook and the Federal Reserve’s ability to navigate a soft landing. Investors continued to gauge the health of the economy.

“Increasing fear of slowing global growth is rearing its head and in our view will start to replace inflation as the major focus for investors going forward as we see whether or not these concerns are justified,” Credit Suisse’s David Sneddon wrote in a Tuesday report. “From a technical perspective, we are starting to see a deteriorating picture for Commodities and especially Industrial Metals, in line with these concerns.”

Fed Chair Jerome Powell will testify before Congress Wednesday and Thursday. His appearance comes after a recent rate hike by three-quarters of a percentage point, the central bank’s biggest increase since 1994.

Lea la cobertura del mercado de hoy en español aquí.

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