Stock Market Ends Higher After Flirting With Bear Market

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Dow industrialists, financial boom; Government bond yields rise while crude oil prices rise

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Monday’s rally provided some respite to investors. The S&P 500 is now down about 17.2% from its January high.

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The Dow Jones Industrial Average rose 618.34 points, or 2%, to 31880.24 on Monday, while the tech-focused Nasdaq Composite Index gained 180.66 points, or 1.6%, to 11535.27.

All 11 sectors of the S&P 500 closed with gains on Monday. Financial performance was the best with a growth of 3.2%. JPMorgan Chase was up 6.2% at $124.60 after giving updated guidance during a presentation on Monday offering a better picture of economic prospects. The bank said it expects to benefit from credit growth and rising interest rates.

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“The bigger picture, particularly the near-term credit outlook for the US consumer, remains strong,” Chief Financial Officer Jeremy Bynum said on Monday. Goldman Sachs rose 3.2%, or $9.81, to $316.61, while the KBW Nasdaq Bank Index jumped 4.1%.

Other stocks that benefited from a stronger economy also rose. Deere rose 7%, or $22.05, to $335.36. Caterpillar rose 3.2%, or $6.33 to $204.15. Discount retailer Ross Stores rose 9.6%, or $6.88, to $78.75.

Stocks have retreated in recent weeks as investors debated how aggressively the Federal Reserve would raise interest rates to cushion increased inflation. Price pressures have eroded some corporate earnings, but wealth managers also worry that tightening financial conditions pose too much risk on economic growth.

Inflation concerns were heightened in recent months as China imposed a lockdown to curb the spread of COVID-19, increasing supply chain tensions. Russia’s war against Ukraine has also caused European countries to move away from Moscow’s oil and gas, driving up prices.

“This year, we’re dealing with a range of issues that would typically be the top story in any given year,” said Hugh Gimber, global market strategist at JPMorgan Asset Management. “Yet the markets are having to deal with all of them at the same time.” He said that this has increased the instability.

Sean Snyder, head of investment strategy at Citi Personal Wealth Management, said while a 20% sell-off generally defines a bear market, what defines a bear market is just a change in the business cycle from expansion to contraction. For investors, he said, this means the next important key is a signal that a bottom has been hit.

While the downside has not yet come, Snyder said investors are already looking for it. According to Dow Jones market data, it takes an average of 132 trading days for the market to go from a high to the start of a bear market, and 213 trading days to reach a low. Monday was the 97th trading day since the peak of the S&P 500, so investors may have a way to go.

“It’s one of those times when you turn off your screen and go on vacation and hope it’s better when you come back,” Mr. Snyder said.

Among other individual equities, VMware shares rose 25%, or $23.72, to $119.43 after the Wall Street Journal reported that Broadcom is in advanced talks to buy the technology company. Shares of Broadcom fell 3.1%, or $16.83, to $526.36.

Investors will also be watching earnings reports from retail stocks this week, seeking clues about how inflation and the effects of the COVID-19 pandemic are affecting consumers. Messi’s,

Dollar General and Costco are among the companies reporting.

Macy’s pairs 1.2%, or 21 cents, at $18.37. Dollar General rose 3.6%, or $6.82, to $194.42. Costco rose 3.1%, or $13.05, to $429.48.

In bond markets, yields on the benchmark 10-year Treasury note ticked up to 2.8577% from 2.785% on Friday. Yields and prices move inversely.

US crude oil prices rose less than 0.1% to $110.29 a barrel. Gas prices at the pump remained in record territory over the weekend, averaging $4.59 per gallon nationwide.

Overseas, the pan-continental Stokes Europe 600 gained 1.3%. The European Central Bank may raise its key interest rate to zero or more by September, President Christine Lagarde said in a blog post Monday, drawing a line under an eight-year experiment with negative interest rates amid rising concerns about record inflation and the weakness of the euro currency.

The euro was trading up 1.2% at $1.0690 against the dollar. Its highest rate since April 25 at 5 p.m. ET.

Major indices in Asia closed mixed. Japan’s Nikkei 225 rose 1%, while South Korea’s Kospi rose 0.3%. China’s Shanghai Composite remained flat and Hong Kong’s Hang Seng declined 1.2%.

Write to Caitlin Ostroff at [email protected] and Paul Vigna at [email protected]

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