New York — Stocks are jumping on Wall Street on Tuesday, making some of the more dramatic moves from Monday’s crazy reverse run.
The SThe&P 500 rose 1.9% in morning trading after a report showed that inflation is still high but heading lower. Shares of small and medium-sized banks recovered some of the previous declines caused by fears that customers may withdraw all their funds. Treasury yields rose, paring their historic lows.
The Dow Jones Industrial Average was up 436 points, or 1.4%, to 32,255 points by 10:40 a.m. ET, while the Nasdaq Composite was up 2.2%.
See also | Facebook subsidiary Meta plans to lay off another 10,000 employees
A week ago, Wall Street was expecting Tuesday’s inflation report to be the most important data of the week, if not the month. The concern at the time was that inflation was still stubbornly high, which could force the Fed to pick up the pace again in raising interest rates.
Such hikes can lower inflation by slowing the economy, but they increase the risk of a recession later. It also hurts the prices of stocks, bonds, and all kinds of other investments.
Tuesday’s report showed that consumer inflation was 6% in February compared to a year earlier. That matched economists’ expectations and was a slowdown from January’s 6.4% inflation rate, but still well above the Fed’s target.
In normal times, this could really warrant large interest rate increases. The Fed’s problem is that it also faces a banking system that may already be in shambles because of all of its rate hikes from last year, which came at the fastest pace in decades. Both the second and third largest bank failures in US history have come since Friday.
“The Federal Reserve is caught between a rock and a hard place,” said Brian Jacobsen, chief investment strategist at Allspring Global Investments.
“Inflation met expectations, but remains uncomfortably hot. Fiscal pressures are intense. Prudence would dictate pause, but heed it with a stern warning that if inflation trends don’t improve, they may need to raise more.”
He said the Fed also has other tools to use besides raising interest rates. Among them: The Federal Reserve could moderate the speed at which it scales back its massive pool of bond investments, a measure that effectively tightens the noose on the financial system.
An easier Fed could give the banking system and the economy more breathing room, but it could also give inflation more oxygen.
Traders rushed on Monday to place some bets that the Federal Reserve may decide to keep interest rates steady at its next meeting, rather than rushing to a 0.50 percentage point hike as they thought a week ago. After the inflation data, bets are largely dropping on it with an increase of 0.25 points later this month, according to data from CME Group.
Stocks rose across the financial industry on Tuesday, recouping some of the sharp declines seen earlier. Financial Republic Bank stock rose 56.1% after falling 67.5% over the previous three days. Zions Bancorp rose 17.5%, KeyCorp rose 15.6% and Charles Schwab jumped 9.3%.
Among other large companies on Wall Street, Facebook’s parent company rose 5.4 percent after saying it expects its expenses this year to be lower than previously forecast. Meta Platforms are downsizing and eliminating job openings to rein in expenses.
The US government announced a plan late Sunday to boost confidence in the banking system in the wake of the failures of Silicon Valley Bank on Friday and Signature Bank on Sunday. Banks struggle as higher interest rates reduce the value of their investments, while grappling with concerns that fickle customers might try to withdraw their money en masse to cause a rush.
Some of the wildest action was in the bond market, where the yield on two-year Treasury notes fell nearly half a percent on Monday. This is a historic step for the bond market. Yields fell as investors piled into investments seen as safe and lowered their expectations of future interest rate hikes by the Federal Reserve.
The two-year yield rose to 4.37% from 4.02% late Monday, another huge move.
The 10-year yield jumped to 3.66% from 3.55%. Helps determine rates for mortgages and other important loans.
European markets also rebounded after a broad decline in Asia.
Bank stocks steadied in the wake of remarks late Monday by the head of the 20-country eurozone’s group of finance ministers, Paschal Donohue, that Europe “has no direct exposure” to Silicon Valley bank.
___
AP Business writers Yuri Kageyama, David McHugh and Matt Ott contributed to this.
[ad_2]
https://abc13.com/stock-market-dow-jones-industrial-average-nasdaq-index-meta/12952750/
