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Stock Market Opens Up Big As It Looks To Build On Massive Gains

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Stocks continued to rally during early Tuesday trading following one of their best trading days of 2022 as the market shakes off its worst fears that sent the market tumbling in September – though some warn the rally will be short-lived.

Key Facts

The Dow Jones Industrial Average rose 2.5%, about 750 points, and is up 4% on the week after a 760-point spike Monday, its second-largest single-day rise of the year.

The S&P 500 rose 2.8% and tech-heavy Nasdaq jumped 3.3%, building on their respective 2.6% and 2.3% gains Monday.

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Tesla shares rose 4.9% early Tuesday after a dramatic 9% loss Monday, as several banks expressed optimism about the electric vehicle maker’s long-term prospects after third-quarter vehicle deliveries fell short of analyst estimates.

Driving this week’s gains are investors’ increasing cautious optimism about monetary policy globally.

The market welcomed the Australian central bank’s Tuesday announcement it would raise interest rates by 25 basis points as opposed to the projected 50 basis point hike, and 10-year U.S. Treasury yields fell a further four basis points Tuesday to its lowest level in two weeks.

Contra

Despite the recent rally thanks to hope about the Federal Reserve backing off its most aggressive rate hike plans, no steps from the Fed can save the market from the “freight train of the oncoming earnings recession” as corporate profits respond to the downturn, Michael J. Wilson, Morgan Stanley’s chief investment officer, wrote in a Sunday note to clients.

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Key Background

The Dow, S&P and Nasdaq each fell about 10% in September as the market reacted to persistent inflation data pricing in more hawkish rate hikes from the Fed. The last three months of the year are typically a strong period for stocks, with the S&P rising about 5% during the quarter on average.

Tangent

Bitcoin rose 2.8% Tuesday to $20,178, its first time over $20,000 in three weeks.

Further Reading

Dow Surges 760 Points As Market Hopes For Positive Fourth Quarter (Forbes)

Source: Forbes

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