NEW YORK (AP) – United States (US) stocks rebounded on Tuesday after falling oil prices released some of the pressure that built up on the market.
The S&P 500 rallied one per cent to claw back all of its loss from the day before.
The Dow Jones Industrial Average rose 126 points, or 0.3 per cent, and likewise neared its record set last week, while the Nasdaq composite led the way with a 1.4 per cent rally.
Wall Street held firm even though stock markets around the world sank following swings in China, as euphoria about possible stimulus for the world’s second-largest economy gave way to disappointment.
Stocks tumbled 9.4 per cent in Hong Kong for their worst day since the 2008 global financial crisis.
Helping to support Wall Street was a sharp drawdown in oil prices. A barrel of Brent crude, the international standard, fell 4.6 per cent to USD77.18 for its first loss in a week and a half.
A barrel of benchmark US crude, meanwhile, eased 4.6 per cent to USD73.57.
That also helped level off the pressure on the stock market from the bond market.
Treasury yields eased a bit, a day after they shot to their highest levels since the summer.
The 10-year Treasury yield edged down to 4.02 from 4.03 per cent late Monday.
The two-year yield, which more closely tracks expectations for what the Federal Reserve (Fed) will do with overnight interest rates, slipped to 3.96 per cent from 3.99 per cent, late on Monday, though it’s still near its highest level since August.
When Treasurys are paying higher yields, investors generally become less willing to pay very high prices for stocks and other investments. And Treasury yields had been storming higher over the last week following a suite of reports showing the US economy remains healthier than expected.
Such reports, including one last week showing stronger hiring by US employers than forecast, raise hopes that the economy will avoid a recession.
But they also force traders to ratchet back expectations for how much the Fed will cut interest rates by, now that it has widened its focus to include keeping the economy humming instead of just fighting high inflation.
Traders have abandoned expectations for the Fed to cut its main interest rate by a larger-than-usual half of a percentage point at its next meeting, for example. Instead, they’re largely betting on a traditional-sized cut of a quarter of a percentage point, according to data from CME Group. Some are even calling for the possibility the Fed could keep its main rate steady in November.
High Treasury yields put the most pressure on stocks seen as the most expensive, and that puts the spotlight on the Big Tech stocks that have led the market for most of the last few years.
On Tuesday, all of the Big Tech stocks that have collectively come to be called the ‘Magnificent Seven’ rose. Nvidia led the way with a gain of four per cent and was the strongest single force pushing upward on the S&P 500.
PepsiCo climbed 1.9 per cent after delivering stronger profit for the latest quarter than analysts expected, though its revenue fell short.
CEO Ramon Laguarta also said the company now expects a “low single-digit” increase in an important measure of revenue for the year after it had earlier forecast growth of about four per cent.
US consumers continue to pull back on buying snacks and drinks after years of price increases.
On the losing end of Wall Street were oil-and-gas companies, which gave back some of their big recent gains driven by the last week’s jump in crude prices. Chevron fell 1.6 per cent and was one of the main reasons the Dow lagged other indexes.
All told, the S&P 500 rose 55.19 points to 5,751.13. The Dow added 126.13 to 42,080.37, and the Nasdaq gained 259.01 to 18,182.92.
In stock markets abroad, trading in mainland China re-opened following a national holiday.
Before, indexes in Shanghai and Shenzhen had surged on hopes for stimulus from the government and the central bank meant to prop up the economy’s flagging growth.
On Tuesday, China’s economic planning agency outlined details of measures aimed at boosting the economy, but it refrained from major spending initiatives. That helped lead to the 9.4 per cent drop for the Hang Seng index in Hong Kong.
In Shanghai, where the market had been closed as Hong Kong ran higher over the last week, stocks rose 4.6 per cent following their re-opening.
The disappointment in China had worldwide effects, knocking down stocks of companies in Europe, the US and elsewhere that do lots of business in and around China. Estee Lauder fell 2.2 per cent, for example, while Wynn Resorts lost 3.3 per cent.
