Monday’s close was generally higher for stocks, a positive start to Wall Street’s week after seven weeks of declines which nearly ended the bullish market that began March 2020.
S&P 500 saw a 1.9% increase, with tech and financial stocks accounting for most of the benchmark index’s gains. The Dow Industrial Average grew 2%, while the Nasdaq rose 1.6%.
According to Quincy Krosby (chief equity strategist at LPL Financial), traders are now primed to buy shares in large tech companies and stocks of other companies that were high-flyers before the market’s brutal crash.
She said, “What we are seeing today is traders coming in and taking advantage the lower (price), levels.” The market is in a tug-of-war between those who believe the market has become attractively priced and those who say it doesn’t account for slower growth. The Dow gained 618.34 points, to 31,880.24, while the tech-heavy Nasdaq gained 180.66 points, to 11,535.27.
Stocks of smaller companies also rallied. The Russell 2000 rose by 19.50 points or 1.1% to 1,792.76.
Major indexes have been in slump due to persistent inflation worries. The S&P 500 benchmark is on its longest losing streak weekly since 2001, when the dot-com bubble burst. The index was close to falling 20% from its peak in January, which would have put it at the heart of many workers’ 401k accounts. This is in addition to the Federal Reserve’s aggressive interest rate increases that attempted to mitigate the impact of inflation on markets. The large supply-demand disconnect and the impact of Russia’s invasion in Ukraine on energy prices has led to an increase in inflation. China’s recent lockdowns of major cities in order to prevent them from receiving rising COVID-19 cases further damaged supply chains.
A series of disappointing earnings reports by key retailers last week has raised concerns that consumers may be reducing their spending on a wide variety of goods due to rising inflation.
Investors worry that the central bank might go too far in raising rates, or move too fast, which could lead to economic stagnation and possibly a recession. Investors will be able to see the Fed’s decision making process in detail on Wednesday when minutes from the most recent policy setting meeting are released.
The Commerce Department will also provide some economic updates for Wall Street this week. It will release Thursday’s report on the first quarter gross domestic product, and Friday will provide data on April personal income and expenditure.
Strong gains by banks and rising bond yields on Monday were accompanied by strong gains. This is what they use to charge higher interest on loans. From 2.77% on Friday, the yield on the 10-year Treasury increased to 2.86%. Bank of America gained 5.9%.
