US stocks rose sharply for a second day as investors secured deals after the longest streak of quarterly declines since 2008, and poor economic data eased concerns about Fed rate increases.
The S&P 500 added 2.7 percent in morning trading in New York, after closing up 2.6 percent on Monday. The technology-heavy Nasdaq Composite Index rose 3.2 percent. Elsewhere, Europe’s regional Stoxx 600 index rose 2.5 percent.
The rally comes after three consecutive quarters of declines for the S&P 500, as the Federal Reserve led the charge of aggressively raising interest rates to curb stubbornly high inflation. Rising borrowing costs and fears that the Fed will cause a recession as monetary policy tightens have weighed heavily on stock prices.
But with the S&P 500 down 21 percent so far this year, some analysts and investors are pointing to opportunities to buy shares on the cheap.
“We are tactically heading towards bullish stocks for [fourth-quarter] “A sharp rise,” analysts at Cantor Fitzgerald said this week. “We think inflation is dropping sharply as we speak and the Fed will admit it soon,” they added.
Employment data from the Bureau of Labor Statistics provided further encouragement to investors on Tuesday that the Federal Reserve will slow interest rate hikes. The number of job openings in the United States in August fell to 10.1 million, below economists’ expectations of 10.8 million and the previous number of 11.2 million.
On Tuesday, markets were forecasting US interest rates to reach 4.4 percent by March 2023, down from estimates of 4.7 percent in late September. The Fed’s current target range is between 3 and 3.25 percent, after three consecutive interest rate increases of 0.75 percentage points.
A manufacturing index released on Monday, which shows that activity in the US factory sector contracted at the fastest pace since May 2020, helped at least temporarily ease concerns about interest rate increases.
But some have warned that the rise may not be sustainable. “It’s not uncommon to see some recovery in a bear market,” said Mabrouk Shatwan, head of global market strategy at Natixis Investment Managers.
“We don’t have enough data to feed a pivot scenario from central banks,” he said, adding that upcoming data on US unemployment and service activity will provide more clues.
“With sentiment towards stocks already weak, cyclical bounces are expected,” said Mark Heffel, chief investment officer for global wealth management at UBS. “But markets are likely to remain volatile in the near term, primarily driven by expectations regarding inflation and monetary policy rates.”
Heffel added that some of the selling pressure that occurred last week may have been caused by the portfolios’ quarterly rebalancing.
Government bond prices rose on Tuesday, after gains in the previous session, with the yield on 10-year US Treasury bonds slipping 0.06 percentage points to 3.6 percent. The two-year yield, which is more sensitive to changes in interest rate expectations, lost 0.04 percentage point to 4.07 percent.
UK bonds rose more sharply, with the 10-year bond yield falling 0.12 percentage point to 3.83 per cent. The gold market last week was under the control of volatility, then Proposed Westminster Tax Deductions The massive borrowing plans spooked investors and triggered a historic sell-off of long-term debt.
The sell-off fell last Wednesday when the Bank of England intervened to calm the turmoil, with sentiment further improving on Monday after Liz Truss’ government was forced to fundamentally change its planned tax cuts for high-income UK earners.
Sterling advanced 0.7 percent on Tuesday to $1.14 against the dollar, back to levels last seen before Finance Minister Kwasi Quarting unveiled his “mini” budget 11 days ago.
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