Stocks increase for the second day in a row ahead of the predicted Fed move
U.S. stocks climbed marginally as investors awaited a key Federal Reserve decision. The S&P 500 increased 0.48 percent to 4,175.48. The Dow Jones Industrial Average closed at 33,128.79, up 67.29 points, or 0.20 percent. The NASDAQ Composite, which is heavily weighted toward technology, rose 0.22 percent to 12,563.76.
Tuesday’s gains built on the previous session’s late rebound, which saw all three main averages, overcome substantial losses to close higher for the day. “For the first time in many days, selling look fatigued, and shorts are a little worried than longs (there aren’t many people who believe ‘the’ bottom is in, but even bears are concerned about a quick rebound rally),” Vital Knowledge’s Adam Crisafulli said in a client note.
These stock market gains come ahead of the Federal Reserve’s widely expected announcement on Wednesday. Wall Street is overwhelmingly anticipating the Fed to increase rates by 50 basis points this week, although some investors say the central bank’s aggressive monetary tightening is already priced into markets.
Billionaire hedge fund manager Paul Tudor Jones said on CNBC’s “Squawk Box” on Tuesday that with the Fed tightening and signals that the economy is weakening, investors should prioritize capital preservation. “You can’t imagine of a worse climate for financial assets than where we are right now.” “Obviously, you don’t want to buy bonds and equities,” Jones explained.
The S&P 500 gained broadly on Tuesday, but the energy sector led the way. Exxon Mobil gained more than 2%, while EOG Resources gained 3.8 percent. Defensive industries including as health care and utilities also outperformed, with Pfizer rising roughly 2% after announcing better-than-expected first-quarter results.
According to LPL Financial, the S&P 500 is trading in correction territory, down approximately 13% from its record highs, although the size and duration of this drop are in line with past corrections. The predicted rate rise comes at a time when there are mounting fears about the global economy, owing in part to China’s lockdowns and Europe’s turmoil. “Markets remain subject to China’s Covid-19 reaction and geopolitics, which are overshadowing what remains a fairly robust underlying picture,” JPMorgan strategist Mislav Matejka said in a client note.
The benchmark 10-year Treasury yield fell after reaching a fresh high on Monday. The bond yield reached 3.01 percent in the previous day, its highest level since December 2018, but dipped below 3 percent on Tuesday. Individual stock movements were sparked by corporate earnings reporting on Tuesday. Chegg’s shares dropped approximately 30% after the textbook maker provided dismal full-year projections despite exceeding profits estimates. Following their quarterly releases, Expedia and Hilton fell 14 percent and 4.2 percent, respectively.
On the bright side, Clorox shares surged roughly 3% after the company’s fiscal third-quarter earnings exceeded expectations. Chemours shares rose more than 17% after the firm boosted its outlook and shown effectiveness in boosting pricing. On the statistical front, there were some encouraging indicators for the economy. Factory orders increased by 2.2 percent in March, which was higher than expected. The number of job opportunities reached an all-time high of 11.5 million.