Wall Street backed off from the cusp of bear market territory as bargain-hunting investors lifted US stocks from last week's battering despite sentiment remaining fragile on fears of a potential recession
NEW YORK (Pakistan Point News / Sputnik - 23rd May, 2022) Wall Street backed off from the cusp of bear market territory as bargain-hunting investors lifted US stocks from last week's battering despite sentiment remaining fragile on fears of a potential recession.
The three major stock indices on Wall Street - which included the S&P 500 for the top 500 US stocks, the broad-based Dow Jones Industrial Average Index and the technology-heavy Nasdaq Composite Index - were up almost 2% by early afternoon Monday from Friday's drop of nearly 4%.
The S&P 500 was at 3,965 points, up 1.6% on the day. On Friday, it was at 3,901, flat on the day but down 20% on the year. In general market terminology, any asset down 20% from its most recent high or from any particular period like a quarter or year-end is defined as having entered a bear market.
US stocks as a whole fell for a seventh straight week last week - their longest losing streak since the dotcom bust of the mid-1990s - amid fears that there could be a recession from the Federal Reserve's determination to hike interest rates aggressively to beat the worst US inflation in 40 years.
"Today is a bounce from oversold conditions over the last couple of months," Jeff Schulze, investment strategist at ClearBridge Investments, said. "The markets are looking for a tradable bottom here in potentially a bear market rally."
Schulze attributed the rebound to bargain-hunting, particularly in stocks of banks, which he said would be resilient enough to withstand any economic shocks from Fed rate hikes. "Banks are in oversold conditions," he said. "They tend to be very economically sensitive and with the data so far, they are actually holding up. There's some optimism that there has been an overpricing of negativity into the earnings potential for banks over the course of the next couple of quarters."
The Federal Reserve has said it will raise interest rates non-stop and even slow the US economy if necessary to bring inflation down from 40-year highs.
After contracting 3.5% in 2020 from disruptions forced by the coronavirus pandemic measures, the US economy expanded by 5.7% in� 2021, growing at the fastest pace since 1982. But inflation has grown just as fast as the economy and faster, with some price gauges showing growth of as much as 8.5% on the year.
If the economy does not return to positive territory in the second quarter, the United States will technically be in recession going by the definition that it takes just two negative quarters in a row to make up a recession.