Wall Street snaps back after its worst week since February
Stocks rebounded on Wall Street on Monday, clawing back most of their sharp losses from last week, as the initial jolt passes from the Federal Reserve’s reminder that it will eventually offer less help for markets.
The Standard & Poor’s 500 index snapped 58.34 points, or 1.4%, higher to 4,224.79 and recovered nearly three-quarters of its worst weekly loss since February. Oil producers, banks and other companies that were hit particularly hard last week led the way.
The Dow Jones industrial average gained 586.89 points, or 1.8%, to 33,876.97, and the Nasdaq composite rose 111.10 points, or 0.8%, to 14,141.48.
Investors are still figuring all the ramifications of the Fed’s latest meeting on interest rate policy, where it indicated it may start raising short-term rates by late 2023. That’s earlier than previously thought. The Fed also began talks about slowing programs meant to keep longer-term rates low, an acknowledgment of the strengthening economy and threat of higher inflation.
The market’s immediate reaction to last week’s Fed news was to send stocks lower and interest rates higher. Any shift by the Fed would be a big deal, after investors have feasted on easy conditions with ultra-low rates for more than a year. Higher rates would make stock prices, which have been climbing faster than corporate profits, look even more expensive than they do already.
But it’s not as if the Fed said it would jack rates higher off their record low near zero anytime soon.
Companies whose profits are the most closely tied to the economy’s strength and inflation were among the market’s strongest Monday.
Hess, Marathon Oil and Devon Energy all rose at least 6.9% as energy stocks rallied with the price of oil.
Banks were also strong, with Bank of America up 2.5% and Wells Fargo climbing 3.7%.
High-growth companies able to flourish almost regardless of the economy lagged behind, meanwhile. It’s a reversal from last week’s trend, when investors rattled by the Fed piled back into the biggest winners of the pandemic.
Amazon slipped 0.9% on Monday, for example, and the lagging performance for tech meant the Nasdaq was trailing other indexes.
Shorter-term yields slipped, and longer-term yields rose in another reversal from last week’s initial reaction to the Fed news.
The two-year Treasury yield dipped to 0.25% from 0.26% late Friday, while the 10-year yield rose to 1.49% from 1.45%.
More bumps may be ahead for markets, which had been mostly quiet for weeks before the Fed’s announcement. Fed Chair Jerome H. Powell will speak before a House subcommittee Tuesday about the Fed’s response to the pandemic.
On Friday, investors will see what the Federal Reserve’s preferred gauge for inflation says about May. Prices have been bursting higher across the economy, including airfares and restaurant meals, but the Fed has so far said it expects the big increases to be only temporary. If it proves to be longer lasting, the Fed may have to raise rates more aggressively.
Corporate deals helped lift shares of some companies well beyond the market’s gains. Industrial products maker Raven Industries jumped 49.3% on news it is being bought by CNH Industrial. Engineered products company Lydall surged 85.4% on news of its sale to Clearlake Capital-backed Unifrax.
Wall Street’s strong gains followed up on a tumultuous day of trading that preceded it in Asia.
Japan’s Nikkei 225 sank 3.3%, while Hong Kong’s Hang Seng fell 1.1% in the first trading after Wall Street’s tumble Friday. South Korea’s Kospi lost 0.8%, but markets calmed as trading headed westward.
Across Europe, stock indexes made mostly modest gains. Germany’s DAX returned 1%.