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