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U.S. stocks charged forward Tuesday as the indexes attempt to swing back from intense selling last week amid worries around persistent levels of inflation and the prospect of an economic slowdown.
Investors are bracing for more Fedspeak this afternoon, with central bank chief Jerome Powell scheduled to give remarks at a conference hosted by the Wall Street Journal.
The S&P 500 jumped 1.5%, and the Dow Jones Industrial Average climbed 375 points, or 1.1%. The tech-heavy Nasdaq Composite gained 1.9%. The moves follow six straight weeks of declines for the S&P 500, its longest span of losses in more than a decade, and seven consecutive down weeks for the Dow Jones Industrial Average, the index’s widest period of weekly losses since 2001.
Uncertainty around the pace and magnitude of the Federal Reserve’s rate hiking cycle has stoked pressure across markets that has persisted throughout the year. In 2022 so far, the S&P 500 is roughly 17% below its all-time high on Jan. 3, while the Dow is down about 13% over the same period and the Nasdaq has fallen deeper into a bear market – well over 20% below its record closing price in November.
“Markets lead the economy,” Citi Private Bank Chief Investment Officer David Bailin told Yahoo Finance. “The fact that markets are lower at this point means that the consumer is slowing, and the global economy is slowing.”
Equity markets have endured “severe technical damage” in recent months, with the S&P 500 falling below the important 4,000 level last Monday before testing bear market levels near 3,850 last Thursday, Comerica Wealth Management Chief Investment Officer John Lynch pointed out in an emailed note.
“Curiously, comments from Fed Chair Jerome Powell indicating the likelihood of economic pain in order to achieve the central bank’s objectives of lowering inflation may have been the catalyst for the S&P 500’s rally beginning Thursday afternoon and lasting through Friday’s close,” Lynch wrote. “Nevertheless, we caution investors that the severe technical damage suffered these past several months will take longer than a few good days to repair.”
Investors will have more Fedspeak to mull in the coming days, including Powell’s remarks slated for Tuesday afternoon, and speaking engagements from other central bank officials slated to take place through Friday.
“The inconvenient truth is the Fed is going to need to raise rates more quickly and to a higher level than many were hoping,” Independent Advisor Alliance Chief Investment Officer Chris Zaccarelli said recently in an emailed note. “There will be at least four 50 bps rate hikes this year and not three or less and we will continue to be cautious with risk assets.”
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