Stocks rally, erase early losses
NEW YORK – U.S. stocks stormed back from sharp losses in the morning to notch gains Monday, the latest round of turbulence for Wall Street.
The S&P 500 climbed 24.34 points, or 0.6%, to 4,296.12 after erasing an early 1.7% loss. Stocks of internet-related companies helped lead the way, including Twitter, which jumped 5.7% after agreeing to sell itself to Tesla CEO and tweeter extraordinaire Elon Musk.
The Dow Jones industrial average rose 238.06 points, or 0.7%, to 34,049.46 after earlier being down 488 points, and the Nasdaq composite rallied 165.56, or 1.3%, to 13,004.85 to lead the market.
Stocks have been shaky recently, with the S&P 500 coming off a three-week losing streak, amid worries about the quick jump in interest rates coming from the Federal Reserve as it tries to rein in high inflation. Strong profit reports for the first three months of the year from big U.S. companies had been offering support, but even that was looking less solid following some mixed reports and forecasts last week.
Now Wall Street is in the midst of one of the most important stretches of the earnings season. Apple, Microsoft, Amazon and the parent company of Google are on deck to report this week. And because they’re among the largest companies by market value, their movements hold the most sway over the S&P 500.
Yields for U.S. government bonds fell Monday, a turnaround from this year’s sharp jump in yields. The yield on the 10-year Treasury, which affects rates on mortgages and other consumer loans, dropped to 2.82% from 2.90% late Friday. It has recently been close to its highest level since 2018.
Lower yields tend to benefit high-growth stocks the most because investors become more willing to pay high prices when they’re not losing much in interest if they bought bonds instead. Gains for several big tech-related stocks were the strongest forces lifting the S&P 500 on Monday, including a 2.4% gain for Microsoft and a 2.9% rise for the Class A shares of Google’s parent, Alphabet. Both are set to report their latest quarterly results Tuesday.
Besides their bottom-line profit numbers, investors are also looking for a better sense of how big companies in the technology, industrial and retail sectors are handling rising inflation and supply chain issues.
Inflation remains a key concern for investors. Investors are worried about whether the Fed will be able to hike rates enough to quell inflation but not so much as to cause a recession. The chair of the Federal Reserve has indicated the central bank might hike shortterm interest rates by double the usual amount at upcoming meetings, starting next week. The Fed has raised its key overnight rate once, the first such increase since 2018.