Shares bounce again from technology-driven sell-off on Monday, Dow gaining 250 factors
Key averages rebounded Tuesday after a technology-centric market escape in the previous session.
The Dow Jones Industrial Average gained around 280 points, or 0.88%. The S&P 500 was up 0.97% and the Nasdaq Composite was up more than 1%.
Mega-cap tech names were solidly in the green on Tuesday. Netflix was up 3.5%, Amazon was up 1.6%, and Apple and Alphabet were both up more than 1%. Facebook stock rose 1% after falling 5% on Monday due to claims made by a whistleblower and a website outage.
Energy stocks rebounded as oil prices continued to rise. The US oil price topped $ 79 a barrel on Tuesday. Exxon Mobil and ConocoPhillips each gained more than 1%. Chevron gained 2.7%.
On Monday, the Nasdaq Composite lost its sixth negative day of seven down 2.1% as the tech heavyweights gave way. The blue-chip Dow lost more than 300 points while the S&P 500 lost 1.3%, dragged down by technology stocks.
Tech was the worst performing sector in the last month as a surge in yields led investors to exit high-valued stocks as rising interest rates can make their future earnings less attractive. Yields are rising as the US Federal Reserve signaled in September that it would soon curb its monthly bond purchases. The US 10-year Treasury yield was around 1.5% on Tuesday after hitting a high of 1.56% last week.
“The sell-off was driven in part by spike in ten-year government bond yields, higher inflation and weaker growth,” wrote Mark Haefele, UBS’s chief investment officer, Global Wealth Management. “Energy shortages and a fiscal impasse in the US Congress have also undermined sentiment. But we view such worries as exaggerated or likely to go away soon, and we expect the equity rally to get back on track.”
The market had a tumultuous September as fears of inflation, slower growth and rising interest rates kept investors nervous. The S&P 500 fell 4.8% last month, seeing its worst month since March 2020, and breaking a seven-month winning streak. The equity benchmark is now 5.4% below its all-time high reached at the beginning of September, but has still gained 14.5% over the year to date.
In Washington, lawmakers are still trying to approve an increase or suspension of the US credit limit and avert a dangerous first bad debt default. The Treasury Department warned last week that lawmakers must tackle the debt ceiling before October 18, if officials estimate the US will exhaust emergency efforts to settle its bond payments.
Still, some believe the outlook for equities will remain robust after weak September as the economy continues to recover from the Covid crisis.
“We do not believe the recent de-risking will result in sustained declines and we stand by our stance of continuing to buy into any weakness,” said Marko Kolanovic, JPMorgan’s chief global markets strategist, in a statement on Monday.
Investors are preparing for the closely watched job report that will be released on Friday.