The Dow Jones Industrial Average closed up 1.7% on Monday after a 5% drop in the previous two days, while the S&P 500 and Nasdaq Composite both rose 0.9%.
The stock market today is a place where people can buy and sell stocks. Monday, the stock market went down after a week of gains. Tuesday, the stock market was up and closed higher than it did on Monday. Wednesday, oil rallied and helped boost the stock market.
Following Monday’s tech-driven selloff, US equities gained on Tuesday, as supply-and-demand friction drove energy prices to multiyear highs.
The Dow Jones Industrial Average increased by 311.75 points, or 0.9 percent, to 34314.67, while the S&P 500 increased by 45.26 points, or 1.1 percent, to 4345.72. The Nasdaq Composite Index, which is heavily weighted in technology, rose 178.35 points, or 1.3 percent, to 14433.83, after dropping more than 2% the day before.
The stock market’s recent volatility is both a consequence of normal seasonal volatility—September and October tend to experience greater selloffs than other months—as well as something that was unavoidable. Stock investors have enjoyed an uninterrupted rally since last March, with the S&P 500 nearly doubling, thanks to a Federal Reserve that has pursued a highly accommodative monetary policy.
According to Michael Gayed, a portfolio manager and creator of the Lead-Lag Report newsletter, the latest bout of volatility was both inevitable and manageable. The S&P 500 is down less than 5% from its early September high, including Tuesday’s gains. “This is, if anything, long overdue,” he added.
Investors are concerned about inflation, the impact of Covid-19 on the economy, and when the Fed will begin tightening monetary policy. They’ve also had to worry about whether the United States would default on its debt, as well as supply-chain snarls and rising commodity prices, which bring the inflation problem home to worried investors.
“Today, the stock markets are more concerned about inflation, the prospect of rising rates, and the fact that this undermines the extremely stratospheric levels that they have been trading at,” said Rob Carnell, Asia-Pacific head of research at ING.
Mr. Gayed believes that the bond market is the most essential thing to keep an eye on right now. The yield on the 10-year Treasury note in the United States is basically the bond market’s forecast for inflation. Investors who had relied on the Fed’s judgment that high inflation was just temporary have been rattled by its recent increase.
“If the bond market says ‘we were incorrect about inflation,’ markets may get extremely frantic,” he added.
The 10-year Treasury note yield climbed to 1.528 percent on Tuesday, up from 1.481 percent the day before. Yields move in the opposite direction of prices.
Changes in bond rates, which influence the valuations that investors assign to far-off future earnings, are particularly sensitive to tech companies. The primary driver of the selloff in tech equities has been higher bond rates.
Tuesday, the falls took a break. A day after its social networking and messaging services were taken down due to an outage, Facebook’s stock gained 2.1 percent to $332.96. Frances Haugen, a Facebook whistleblower, testified before Congress on Tuesday about internal papers indicating the company’s products cause damage.
Microsoft increased by 2% to $288.76, Amazon increased by 1% to $3,221.00, and Apple increased by 1.4 percent to $141.11.
Meanwhile, rising energy costs threaten to put even more pressure on businesses, just as the outlook for profits is darkening. The U.S. oil benchmark, West Texas Intermediate, gained 1.7 percent to $78.93 a barrel, reaching its highest level since Oct. 31, 2014.
Concerns about a stockpile shortage as winter approaches drove up natural-gas prices. Gas futures in the United States increased by 9.5 percent to $6.31 per million British thermal units. Since 2008, this was the highest settlement price.
In economic news, the US trade deficit expanded more than anticipated in August, according to statistics. In August, the trade balance was $73.3 billion in deficit. Economists had predicted a smaller gain than the previous month.
According to the Institute for Supply Management’s newest report, activity in the US services sector rose marginally in September. Despite significant supply-chain problems and labor constraints, the group’s activity index increased to 61.9 from 61.7 in August, indicating robust demand.
As it battles to stay afloat, Evergrande, China’s most indebted property developer, has prompted domestic demonstrations.
Stock markets in Asia followed Wall Street’s losses on Monday. The Nikkei 225 index fell 2.2 percent to 27822.12 in Tokyo, with SoftBank Group, a tech-investing behemoth that is one of the market’s largest components, down 3.8 percent.
Concerns over China’s property firms, sparked in recent weeks by problems at China Evergrande Group, were reignited late Monday by the announcement that smaller competitor Fantasia Holdings Group had failed to repay its maturing dollar notes. The stock of Fantasia was suspended from trading, and the Lippo Select HK & Mainland Property index dropped more than 3%.
Banks, technology, and media firms drove the Stoxx Europe 600 index up by 1.2 percent to 456.03.
Bitcoin has surpassed the $50,000 barrier for the first time in a month in the highly speculative crypto market. According to CoinDesk, it was recently up 4.8 percent at $51,666. Coinbase Global, the largest cryptocurrency exchange in the United States, increased 4.7 percent to $240.09.
Financial difficulties at Evergrande have fueled concerns about Chinese property firms.
Getty Images/Getty Images/Getty Images
Amplifications and corrections Late Monday, Fantasia Holdings Group announced that it had defaulted on certain maturing dollar debts. The company’s name was misspelled in a previous version of this article as Fantasia Group Holdings. (Correction added Oct. 5.)
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The stock market futures are higher after Monday’s selloff. Oil has also rallied, with the benchmark Brent crude oil up 3% to its highest since November 2014.
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