2024-08-07 02:08:49
Wall Street’s three main stock indexes closed higher today, recouping some of the losses from the previous three days, as investors changed their stance and Japanese stocks rallied.
The S&P 500 rose 1.04% to close at 5,240.03. The Dow Jones gained 294.39 points, or 0.76%, to end at 38,997.66. As for the Nasdaq high-tech index, it closed at 16,366.85 points, up 1.03%.
All 11 sectors of the S&P 500 moved into positive territory with several of the top tech stocks recovering from Monday’s sharp sell-offs. Nvidia gained 3.8%, while Meta Platforms gained 3.9%.
The rally in Japanese stocks contributed to the improvement in sentiment. The Nikkei 225 index recorded its best session since October 2022, up 10.2%. That came after Monday’s worst daily performance since 1987, down 12.4%.
Volatility will remain in the near term, however, as carry trade closings are not yet complete, said Ross Mayfield, strategist at Baird.
“I wouldn’t be surprised if I saw some more pressure in the coming weeks, but I think the fears about the path of the US economy have been removed,” he adds.
The labor market remains strong, although it has cooled, while other indicators remain resilient. While Mayfield reckons market volatility will continue, he isn’t worried about market fundamentals.
Yen carry trades were to blame for Monday’s wild pounding, as Japan’s central bank raised interest rates from 0.1% to 0.25%, paving the way for the yen to rally. This has affected the practice of investors borrowing in low-yielding currencies to buy other high-yielding international assets. However, the yen weakened today.
What usually comes after “Black Mondays”
Buying U.S. stocks after a decline like Monday’s and the previous two sessions is usually profitable, according to Goldman Sachs. Since 1980, the index has averaged a 6% return in the quarter following a 5% decline from its recent highs.
“The market is oversold and that’s why it was ready for recovery. The question now is whether the concerns that drove the market into this hemorrhaging have been eliminated. However, volatility is expected to continue,” notes Quinsky Crosby of LPL Financial.