Traders on the ground of the NYSE, Aug. 8, 2022.
Source: NYSE
U.S. stocks rose Tuesday, reversing earlier declines, as investors looked ahead to key inflation data and earnings reports out later within the week that may give the Federal Reserve more updated information on the state of the U.S. economy.
The Dow Jones Industrial Average gained 328 points, or 1.13%, uplifted by jumps in Amgen and Walgreens Boots Alliance. The S&P 500 rose 0.37%, rebounding after hitting its lowest level since November 2020 earlier within the session. The Nasdaq Composite also rebounded from a 52-week low but still declined 0.04% weighed down by struggling tech stocks including Meta.
Bond prices also fell, and the yield on the U.S. 10-year Treasury neared the important thing 4% level overnight. Yields backed off their rally Tuesday morning, with the 10-year yield up about 1 basis point at 3.894%. Bond yields are inverse to prices, and a basis point is one hundredth of 1 percent.
Investors are awaiting a couple of key inflation reports out later within the week that may inform how aggressively the Federal Reserve will hike rates of interest going forward to tame inflation. On Wednesday, the producer price report can be released and followed by the September consumer price index Thursday. On Friday, September retail sales will give further insight into consumption.
The trail of the central bank’s rate of interest increases will determine whether or not the U.S. economy falls right into a recession or experiences a soft landing.
“That is an awful stock market environment that’s grappling with a weakening economy, uncertainty over earnings and the way long the Fed’s tightening will last, and sentiment issues with a particularly risk averse investor psychology,” said David Bahnsen, chief investment officer of The Bahnsen Group, in a Tuesday note.
“We imagine the Fed will raise rates of interest one or two more times until the Fed funds rate reaches 4% after which take a pause, at which point the Fed will assess the damage done,” he added.
JPMorgan CEO Jamie Dimon on Monday warned that the U.S. would likely fall right into a recession over the subsequent “six to nine months,” and said the S&P 500 could fall one other 20% depending on whether the Federal Reserve engineers a soft or a tough landing for the economy. Stocks fell Monday, with the Nasdaq notching a 2-year low, across the comments which hit technology stocks.
This week also kicks off earnings season. On Friday, JPMorgan, Wells Fargo, Morgan Stanley and Citi – 4 of the world’s largest banks – report quarterly earnings.
