Wall Street climbs as some beaten-down bank stocks recover
Stocks ended broadly higher on Wall Street on Tuesday as some of the most breathtaking moves from a manic Monday reversed course.
The S&P 500 rose after a report showed inflation is still high but heading lower. Stocks of smaller and midsized banks recovered some of their prior plunges caused by worries that customers could yank out all their cash. Treasury yields soared to trim their historic drops.
Tuesday’s report showed that inflation at the consumer level was 6% in February versus a year before. That matched economists’ expectations and was a slowdown from January’s 6.4% inflation rate, but it’s still way above the Fed’s target.
In normal times, that could indeed call for an increase in the size of interest-rate hikes. The trouble for the Fed is that it’s also facing a banking system that might already be cracking due to its rate increases from the last year. The second- and third-largest bank failures in U.S. history have both come since Friday.
“The Fed is stuck between a rock and a hard place,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments.
“Inflation met expectations, but is still uncomfortably hot. Financial stresses are intense. Prudence would dictate they pause, but couple it with a stern warning that if inflation trends don’t improve that they might need to hike more.”
He said the Fed also has other tools. Among them: The Fed could adjust the speed at which it’s shrinking its massive trove of bond investments, an action that effectively tightens the screws on the financial system.
An easier Fed could give the banking system and economy more breathing room, but it could also give inflation more oxygen.
The S&P 500 rose 64.80 points (1.7%) to 3,920.56. The Dow Jones Industrial Average gained 336.26 (1.1%) to 32,155.40. The Nasdaq jumped 239.31 (2.1%) to 11,428.15. The Russell 2000 picked up 32.59 (1.9%) to 1,776.89. and passionate colleagues who have been part of our success.”
Since mid-2022, tech and biotech companies have revealed plans to eliminate well over 22,000 jobs.