Stocks rose sharply on Tuesday, ending a three-day losing streak, as recent comments from Federal Reserve officials eased fears of a U.S. recession and investors flooded back into the market after a dramatic sell-off the previous day.
The Dow Jones Industrial Average pared gains after rising more than 700 points during intraday trading. After dropping more than 1,000 points on Monday, the index rose nearly 300 points, or 0.8 percent, to close at 38,997.66.
The S&P 500 and Nasdaq each rose 1%. Nvidia, which had fallen more than 6% the previous day, rose 3.8%, providing the biggest boost to the S&P 500 and Nasdaq.
All major sectors of the S&P 500 surged, with technology and real estate rising the most.
Central bank policymakers pushed back against the notion that a weaker-than-expected July jobs report means the economy is heading toward a recession, but also warned that the Fed would need to cut interest rates to avoid that outcome.
“The market had just been weighted toward the upside, but there’s been a fair bit of recalibration, especially on the Nasdaq, and there’s been a resurgence of the view that lower interest rates will support stocks,” said Rick Meckler, a partner at Cherry Lane Investments, a family investment firm in New Vernon, New Jersey.
Traders see a 75% chance of a 50 basis point cut at the Fed’s next policy meeting in September, and a 25% chance of a 25 basis point cut. A 50 basis point cut was fully priced in on Monday, with a 75 basis point cut also seen as possible, according to CME Group’s FedWatch tool.
Stocks fell as weak economic data raised fears of a U.S. recession.
Market concerns were further fuelled after the Bank of Japan unexpectedly raised interest rates last week, leading investors to scale back yen-denominated transactions that they have long used to finance equity purchases.
The next big event for the Fed will be a speech by Chairman Jerome Powell in Jackson Hole from August 22-24.
Shares of ride-sharing and food-delivery company Uber rose 11 percent after the company reported second-quarter revenue and core profit that beat Wall Street expectations, helped by steady demand for its services.
Caterpillar shares rose 3 percent after higher prices for large excavators and other equipment offset waning demand in North America and reported second-quarter profit that beat analyst expectations.
