US stock indexes opened in the green on Tuesday, extending a string of gains that began last week. Optimists believe that a bottom had been found after a brutal start to 2022, while pessimists dismiss the rise as simply a bear-market rally with more pain ahead.
Shortly after the open, the
Dow Jones Industrial Average
was up 411 points, or 1.3%, while the
rose 1.1%, and the
There was incrementally good news from China on Tuesday, with the world’s second-largest economy halving the quarantine time for foreign travelers into the country.
(ticker: DIS) Shanghai Disneyland is also set to reopen this week with limited capacity after a several-month closure.
After a terrible start to 2022, investor sentiment toward some of the most beaten-down stocks and sectors has shifted over the past 10 days. The S&P 500 notched its best day since 2020 on Friday, then saw only negligible losses on Monday.
Investors appear to be focusing on what could go right over the remainder of the year. Yardeni Research’s Ed Yardini listed a few positives in a morning note: a strong job market, companies buying back their own stock, signs that pessimism had gone too far, and strong bank balance sheets. The latter was in the news again Tuesday, as many US financial institutions decided to raise their dividends after passing the Fed’s stress tests.
That was boosting the shares of Goldman Sachs (GS), Bank of America (BAC), and Wells Fargo (WFC), which have all gained at least 2.5% in Tuesday trading, while Morgan Stanley (MS) has climbed 4.3%.
On the other hand, the familiar pressures remain, with investors particularly focused on tightening monetary policy and the possibility of a recession. The Federal Reserve is moving aggressively to raise interest rates, having already executed the biggest rate hike in almost 30 years. The central bank is expected to go much further by the end of this year, in a bid to tame the highest inflation in four decades.
That shift has pushed bond yields higher and squeezed stock multiples. Earnings estimates have held up for most individual stocks and sectors, but the concern is that tighter monetary policy could spur an economic downturn, forcing earnings forecasts to fall and pushing stocks even lower.
Next up from the central banks this week is an event on Wednesday, when Fed Chairman Jerome Powell and the heads of the European Union and UK central banks will discuss monetary policy.
There will also be plenty of economic data to help determine the future course of rate hikes. US personal-consumption expenditures data Thursday will be closely watched, considering PCE is the Fed’s preferred inflation indicator, while jobless claims on Thursday and the ISM Manufacturing Survey Friday will provide a more up-to-date read on the health of the economy. Next week will bring the June employment report.
Chinese moves to relax Covid-19 restrictions in recent days have also helped boost optimism around the stock market, while also providing a boost to travel stocks in that country.
(TCOM), for one, has jumped 15%, while
(TOUR) has soared 45%.
Contrary to the Fed, China’s central bank is loosening policy this year.
“Not only has the PBOC continued to ease, China is starting to wake up to their absurd quarantine rules and started to ease them,” wrote NatAlliance Securities’ Andrew Brenner. “That has given equities a bid.”
index rose 0.9% Tuesday.
In another sign of economic optimism, oil prices moved higher Tuesday. Futures for the US benchmark West Texas Intermediate crude rose 1.6% to more than $111 a barrel.
“Oil has risen as the G-7 proposed new sanctions on Russian fossil fuels and the US Strategic Petroleum Reserve fell to its lowest since 1986,” said Neil Wilson, an analyst at broker Markets.com.
Overseas, the pan-European Stoxx 600 was up 0.9% and Tokyo’s Nikkei 225 gained 0.7%.
The remainder of this week’s action might be driven as much by quarter-end trading as by anything fundamental.
“It is the month and quarter-end this week, and that will prompt no small amount of portfolio rebalancing by institutional investors globally,” said Jeffrey Hally, an analyst at broker Oanda. “We should expect the back-and-forth chop-fest to continue this week in the equity space.”
Here are some stocks on the move Tuesday:
(SNOW) jumped 3.5% after shares in the cloud-based data warehousing company were upgraded to Buy from Hold at Jefferies.
(SAM) declined 3.1% after getting cut to sell from Neutral at
Molson Coors Beverage
(TAP) rose 2.9% after getting upgraded to Neutral from Sell.
(EBAY) ticked up 0.2% despite getting cut to Neutral from Buy at UBS.
(NVO) fell 2.7% after getting cut to Sell from Neutral at UBS.
(QCOM) advanced 3% after getting added to BofA’s US 1 List.
(RIOT) gained 2.5% after getting upgraded to Buy from Neutral at Compass Point.
After a 14% rally on Monday,
(HOOD) fell about 2%. Shares in the online broker declined after Sam Bankman-Fried said his cryptocurrency exchange FTX wasn’t in talks to buy the group, contrary to a news report Monday.
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