Wall Street Rallies Again Wednesday
NEW YORK (AP) -- Stocks are bouncing higher on Wall Street again as a bit more fear washes out of global markets Wednesday following their steep, scary slides that began last week.
The S&P 500 was 1.3% higher in early trading and on pace for a back-to-back gain of at least 1% following a brutal three-day losing streak where it tumbled a bit more than 6%. The Dow Jones Industrial Average was up 251 points, or 0.6%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 1.9% higher.
Several reasons were likely behind the slide for markets worldwide, and one of them that's centered in Japan seems to be calming. The Bank of Japan raised its main interest rate by only a bit last week, but the move nevertheless sent aftershocks worldwide. It scrambled a favorite trade among some hedge funds and other investors, who borrowed money for very cheap in Japanese yen and then invested it elsewhere around the world.
Japan's rate hike sent the value of the Japanese yen soaring, and the resulting exit of investments by those hedge funds and other investors likely slapped turbochargers onto market losses, including the worst drop for the Nikkei 225 since the Black Monday crash of 1987.
Speaking to business leaders in the northern island of Hokkaido, Shinichi Uchida, deputy governor of the Bank of Japan, acknowledged the recent market turmoil, which was also triggered in part by concerns about the slowing U.S. economy.
Japan's central bank can afford to wait, he said, and "will not raise its policy interest rate when financial and capital markets are unstable." He also said he believed the U.S. economy would have a "soft landing" and avoid a recession, even if fears have risen the Federal Reserve has kept interest rates too high for too long in hopes of stifling inflation.
The Japanese promise offered a balm for markets, nervous about additional moves by the Bank of Japan, which only recently ended its yearslong campaign to keep interest rates below zero. But it also highlights how some risks may remain, suggesting there's still room left for the unwind of the popular "carry" trade and that some hedge funds and other investors "still remain offsides," according to John Lynch, chief investment officer for Comerica Wealth Management.
Still, several signals of improved optimism continued to light up on Wall Street. A measure of how much professional investors are paying to protect from future losses in the S&P 500 index eased. Treasury yields also climbed in an indication that that investors are feeling less need to own the safest of investments.
The yield on the 10-year Treasury rose to 3.93% from 3.90% late Tuesday. It had briefly dropped below 3.70% during Monday when fear in the market was spiking and investors were speculating the Federal Reserve could even have to call an emergency meeting to cut interest rates quickly.
The expectation on Wall Street is for the Fed to cut its main interest rate at its next scheduled meeting next month by either the traditional quarter of a percentage point or the more severe half of a point.
In the meantime, earnings reports from the biggest U.S. companies continue to roll in, and the growth for those in the S&P 500 index may end up being the best since 2021, according to FactSet.
CVS Health beat analysts' expectations for profit in the latest quarter, but its revenue fell short. It also cut its forecast for profit over the full year, and its stock fell 1.3%.
Airbnb tumbled 14.3% after its profit in the second quarter fell short of analysts' expectations, and it told investors that it saw some signs of slowing demand in the U.S.
Super Micro Computers dropped 14.4% after also reporting weaker results than Wall Street expected. It had been one of the year's biggest winners amid investors' frenzy around artificial-intelligence technology. It soared more than 300% in the year's first two and a half months, but such moves caused critics to say the AI bonanza sent many stock prices too high.
They've pointed in particular to Nvidia, Apple and the other handful of Big Tech stocks in the "Magnificent Seven" that were the main reason the S&P 500 set so may records this year. Their immense strength helped overshadow weakness across other areas of the stock market, which were struggling under the weight of high interest rates.
A set of underwhelming profit reports recently, kicked off by Tesla and Alphabet, added to the pessimism and dragged Big Tech stocks lower.
Nvidia dropped nearly 19% from the start of July through Monday on such concerns, but it rose 3.7% Wednesday and was one of the strongest forces pushing upward on the market following a similar gain on Tuesday. Microsoft and Apple were also pushing the market higher.
In stock markets abroad, indexes climbed across much of Europe and Asia as calm headed westward.