Wall Street saw its worst day in months last Friday.
Angels Weiss/AFP via Getty Images
Stocks are bouncing on a quiet, pre-Labor Day Tuesday as markets digest a recent Federal Reserve-induced decline.
Dow Jones Industrial Average futures have advanced 216 points, or 0.7%. S&P 500 futures have risen 0.8% and Nasdaq Composite futures have gained 1.1%.
“Stock markets are bouncing back on Tuesday following a rocky couple of weeks as investors grew nervous about the economic impact of tightening,” writes Craig Erlam, senior market analyst at Oanda.
It has indeed been a rough few weeks. The S&P 500 comes into Tuesday down just over 6% from its mid-August peak following a summer rally, with weakness driven by Jerome Powell’s emphatic speech that put hopes for a Fed pivot to be once and for all (we hope) as the central bank fights inflation.
The latest murmur out of the central bank came from Minneapolis Fed President Neal Kashkari, who told Bloomberg on Monday that he was “happy” to see how Powell’s Jackson Hole speech was received by a stock market selloff. Kashkari said that it was a sign that investors understand how seriously the Fed is committed to getting inflation down to 2%.
While that has sent rates close to their multiyear peaks, they aren’t surpassing those levels. The 2 Year Treasury yield, down 0.028 percentage points to 3.409%, is trading just below its high of the year. With U.S. rates pausing their recent ascent, the dollar has also stumbled. At 108, the U.S. Dollar Index, too, is just below its multidecade high, but lower U.S. rates make the country’s fixed-income less attractive.
The pause in rates and the dollar are helping the stock market recover some Tuesday. “Stock futures are enjoying a solid oversold bounce this morning with both Treasury yields and the dollar index pulling back from their recent highs,” writes Sevens Report’s Tom Essaye.
That’s for the moment, but any bounce will get tested Friday. That’s when the Bureau of Labor Statistics publishes the August employment report. Economists expect 318,000 jobs to have been added, which would be down from 528,000 in July. A cooling jobs market might be a good sign for the stock market because it could mean the Fed can slowly take its foot off the brakes.
It’s a bad-news-is-good-news world once again.
Here are two stocks on the move Tuesday:
Baidu (ticker: BIDU) gained 2% in premarket trading after the Chinese internet giant posted earnings and revenue ahead of Wall Street’s expectations. The group notched earnings of $2.36 a share on revenue of $4.4 billion in the three months to the end of June, firmly outpacing analysts’ estimates of a profit of $1.54 a share on $4.3 billion in revenue.
Bayer (BAYN.Germany) rose 4% in Frankfurt trading. The pharmaceutical company was upgraded to Outperform at BNP Paribas Exane, which said it was a defensive play in a tough macro environment and that an earnings drop-off was unlikely in the medium term.
Bed Bath & Beyond (BBBY) has gained 13% one day ahead of its investor update.
Write to Jack Denton at jack.denton@dowjones.com
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