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Market Snapshot: Dow gives up 500-point gain as stock market’s bounce attempt fades

U.S. stocks traded sharply higher early Tuesday, bouncing after three days of heavy selling on the eve of the key inflation report.

What’s happening

The Dow Jones Industrial Average

rose 377 points, or 1.2%, at 32,622, after rising more than 500 points in opening action.

The S&P 500

was up 55 points, or 1.4%, at 4,047.

The Nasdaq Composite

jumped 202 points, or 1.7%, to 11,825.

On Monday, the Dow fell 654 points, or 2%, while the S&P 500 declined 3.2%, to close below the 4,000 threshold and at its lowest since March 31, 20201. The Nasdaq Composite plummeted 4.3% to its lowest finish since November 2020.

Over the last three days, the S&P 500 has dropped 7.2% — the biggest three-day decline since March 20, 2020, when the world was confronted with the coronavirus pandemic.

What’s driving markets

The early rise may give traders thought that a so-called Turnaround Tuesday may materialize. Data from Bank of America finds that the best returns for the S&P 500 this year have been on Mondays, though Tuesday’s cumulative loss of 1.2% is far narrower than the 10.6% drop on Thursday and the 7.9% decline on Thursday.

If anything, the corporate earnings news since Monday’s close has been negative, with steep earnings-related declines for companies including lending platform Upstart Holdings
online marketplace Groupon

and fuel-cell maker Plug Power

See: Upstart stock could shed more than half its value as earnings highlight ‘perfect storm of headwinds’

The broader issue confronting the market is that the Federal Reserve will keep tightening until it sees signs that inflation is getting under control, and there’s no indication that’s anytime soon.

The one asset benefiting is the U.S. dollar
trading around two-decade highs, while gold

is holding its own, and riskier assets including bitcoin

selloff. The dollar rally appeared to cool on Tuesday, while Treasury yields continued a pullback from 3 1/2-year highs, with the rate on the 10-year note

down more than 10 basis points at 2.974%.

“There is one potential catalyzer this week, that could eventually slow down the market selloff: U.S. inflation data due Wednesday. The consumer price index is expected to have eased to 8.1% in April from 8.5% printed a month earlier. A softer inflation is the only thing that could give hope to investors,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

President Joe Biden is due to give a speech at 11:30 a.m. Eastern outlining his administration’s attempts to bring down inflation.

Companies in focus

Shares of AMC Entertainment Holdings Inc.

rose 8.8% after the theater-chain operator and meme-stock favorite produced a better first quarter than expected.

Peloton Interactive Inc.

shares tumbled 17% after the connected-exercise company fell short with its most recent financial results and delivered a downbeat outlook.

Shares of Novavax Inc.

dropped 19% after the biotech company reported its first profitable quarter, but not by as much as Wall Street expected, and its sales were also below estimates.

Tesla Inc.

suspended production at its Shanghai plant, this time due to supply problems, Reuters reported Monday night. Shares were up 2.2%.

Pfizer Inc.

said Tuesday it has entered a definitive agreement to acquire Biohaven Pharmaceutical Holding Company Ltd.

for $11.6 billion in cash. Biohaven shares jumped 71.4%, while Pfizer shares rose 1.9%.

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