US stocks rose on Tuesday as central banks may be less aggressive with plans to hike their interest rates amid hopes of a fall in bond yields.
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The Dow rose 765 points, or 2.7%, on Monday, while the S&P 500 gained 2.6% and the Nasdaq Composite 2.3%. The S&P 500 enjoyed its biggest daily percentage gain since July 27, but is down 22.8% for the year to date.
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The S&P 500 index was attempting to extend the previous session’s 2.6% percent jump to a 22-month low on Tuesday.
Deutsche Bank strategist Jim Reid said there were several factors driving the rally at the start of the week, including oversold conditions and easing market tensions in Europe, “but the main was growing speculation that the central bank would soon Slow trend, especially after the turmoil in the market in the last few weeks.
The Fed, along with most of its developed-economy peers, has been raising interest rates aggressively over the past several months to counter inflation running to 40-year highs, and the resultant jump in bond yields has pushed equity benchmarks. Has triggered a bear market.
However, skeptics see little evidence that the rise is more than just another bear-market surge.
“It mainly seemed like short-covering to me once again. We see these kinds of moves very often, and maybe it turns into something, but I doubt it,” Michael Kramer, founder of Mott Capital Management, said in a note.
Major stock indexes have been caught in a bear market but have seen sharp rallies, including a jump of more than 17% in mid-June by the S&P 500 before its latest leg down.
Some investors are expecting that the peak of this monetary tightness cycle may be in sight.
Backing this statement was a weak US manufacturing survey on Monday, which Barclays noted as cost pressures eased amid fewer delivery delays and order backlogs.
The U.S. ISM manufacturing index described the rapid expansion as slowing investors’ expectation, and “gave a positive spin to the market,” said Swissquote Bank senior analyst Ipek Ozkardeyskaya.
“I believe this is an important sign that despite the vigorous rhetoric from Federal Reserve officials, many investors no longer believe that the Fed can continue to tighten at the current pace. It is time for global markets to return. There is a good component, ”said Ozkardeevskaya.
Adding to the sentiment was news from Down Under, where the Reserve Bank of Australia hiked interest rates by 25 basis points lower than expected at its meeting on Tuesday, helping shore up stocks in Asia and lowering bond yields.
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Investors were hoping the Fed might have to exercise such caution. Policy-Sensitive 2-Year Treasury Yield TMUBMUSD02Y,
Which ended the week around 4.28%, down 2.9 basis points to 4.08%.
US economic data to be released Tuesday includes job openings and leave data for all of August and all due at 10 a.m. Eastern Time, along with factory orders.
Fed speakers include Fed Gov. Philip Jefferson at 11:45 a.m. and San Francisco Fed Chair Mary Daly at 1 a.m.
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Credit: www.marketwatch.com /