Is the worst really over on Wall Street? It’s too soon to say. But stocks rose sharply again Tuesday following Monday’s big rally.
The Dow surged 825 points, or 2.8%. The Dow has soared more than 1,500 points in the past two days. It is now back above the key 30,000 milestone and is about 18% off its most recent record high, meaning that is no longer in a bear market.
“It almost feels like a panic rally. The market mood got way too sour and people started to jump in,” said Callie Cox, US investment analyst with eToro. “But this rally feels random. It’s great to see stocks go up but these moves are a little disorienting. I’m being cautious.”
The market’s mood has improved due to renewed hopes that banking giant Credit Suisse (CS) will be able to avoid a financial meltdown similar to Wall Street firm Lehman Brothers 14 years ago.
There have been growing fears that Credit Suisse is in serious trouble. But the bank’s stock price has rebounded in the past two days and the cost to insure Credit Suisse’s bonds fell too. That’s a sign that investor anxiety about the bank’s future has subsided somewhat.
Major European stock exchanges have rallied in the past few days as well as jittery investors relax a bit. One fund manager noted that there are more companies that look attractive lately given the large pullback in global markets so far this year.
“There are opportunities within Europe. There are some companies we have admired from afar that are getting interesting,” said Louis Florentin-Lee, a manager with the Lazard International Quality Growth Portfolio.
In other corporate news, semiconductor stocks got a boost after chip giant Micron (MU) announced plans to spend $100 billion over the next two decades to build a new plant in upstate New York. Shares of Micron (MU) gained 4%. Fellow semiconductor companies Intel (INTC), Nvidia (NVDA) and AMD (AMD) rallied as well.
Shares of Twitter (TWTR) surged 22% after Elon Musk once again offered to buy the social media site for $44 billion, or $54.20 a share. The stock was halted earlier in the day following reports of the Musk deal.
Betting on the Fed being less hawkish
A smaller than expected interest rate hike by the The Reserve Bank of Australia also is lifting spirits on Wall Street. Central banks around the world are boosting rates to fight inflation. But economic and market uncertainty could lead the Federal Reserve and other banks to slow the pace of rate increases.
The worry is that overly aggressive rate hikes could lead to a significant recession. CEOs surveyed by KPMG US are predicting a downturn in the next 12 months and they are worried that it won’t be mild or short.
But bond investors are now starting to price in the possibility that the Fed will pull back on its rate hiking spree. The benchmark 10-year US Treasury yield, which briefly spiked to 4% and hit its highest level since 2008 last week, has since tumbled and is now back around 3.6%.
Investors no longer seem as nervous about the future as they did just a week ago either. The VIX (VIX), a key indicator of volatility on Wall Street, fell about 3% Tuesday.
The CNN Business Fear & Greed Index, which looks at the VIX and six other measures of market sentiment, moved out of Extreme Fear territory as well. But it remains at Fear levels.