Wall Street’s main indexes rose in volatile trading on Tuesday, as investors looked for bargains after a rout in the previous session, while dovish rate commentary from Federal Reserve officials also lifted the mood.
In morning trading, the Dow Jones Industrial Average jumped as much as 550 points before paring gains. The blue-chip index was recently up 289 points or 0.8%, at 39,014. The S&P 500 and the Nasdaq both gained 1.3%.
Most megacap and growth stocks, which together lost $200 billion in market value on Monday, gained as Nvidia bounced back 2.3%.
Apple slipped 1.9%, extending a nearly 5% drop on Monday after Warren Buffett’s Berkshire Hathaway cut its stake in the iPhone maker by half.
Both the S&P 500 and the Nasdaq posted losses of at least 3% each in the previous session after weak economic data raised worries of a US recession and the unwinding of sharp positions of carry trades that fund high-yielding assets.
Goldman Sachs in a note said investors typically profit when they buy after a 5% selloff in the S&P 500 index.
“We’re getting a relief rally specifically because the yen depreciated a little bit overnight and that would remove the pressure for margin calls, so the selling pressure has abated, which provides an opportunity for the market to rise with some buyers coming to the table,” said David Waddell, CEO and chief investment strategist at Waddell & Associates.
US central bank policymakers pushed back on Monday against the notion that weaker-than-expected July jobs data means the economy is in recessionary freefall, but also warned that the Fed will need to cut rates to avoid such an outcome.
Traders currently see an about 75% chance of a 50-basis-point rate cut in September, down from 85% on Monday and expect the year-end rates at 4.25%-4.50%, according to CME’s FedWatch Tool.
A closely watched gap between the two- and 10-year benchmark yields turned positive on Monday, which typically indicates that the economy is heading into a downturn.
Ten of the 11 major S&P 500 sectors were trading higher, with consumer staples and information technology leading the gains.
Among other movers, Palantir Technologies surged 10% after the software services provider raised its annual revenue and profit forecasts for the second time this year.
Uber jumped 4.3% after it beat Wall Street estimates for second-quarter revenue and core profit, helped by steady demand for its ride-sharing and food-delivery services.
Caterpillar added 1% after beating Wall Street estimates for second-quarter profit, as higher prices on its larger excavators and other equipment countered moderating demand in North America.
Kenvue added 12% after beating estimates for second-quarter profit and revenue, helped primarily by better-than-expected sales in its essential health products unit.
