NEW YORK – The Dow Jones Industrial Average soared more than 800 points and the S&P 500 had its best day in more than two years on Tuesday as the market clawed back more of the ground it lost in a miserable few weeks on Wall Street .
The S&P 500 rose 3.1%, its best day since May 2020, as all but six stocks in the index posted gains. The benchmark has rallied since hitting a year low on Friday only to end a slide in September.
Twitter jumped 22.2% after Elon Musk said he would go ahead with his acquisition of the social media company for $44 billion, abandoning months of efforts to pull out of the deal.
The Dow rose 2.8% and the Nasdaq composite climbed 3.3%. Smaller company stocks also made strong gains, pushing the Russell 2000 up 3.9%. The European and Asian markets also made significant progress.
The two-day rally hit markets as investors look for signs that central banks may ease aggressive rate hikes aimed at tackling the highest inflation in four decades. central bank of australia made an interest rate hike smaller than previous ones and helped the Australian market jump 3.8%.
In the United States, a government report on Jobs showed that the number of jobs available in the United States fell in August compared to July. It’s a sign that companies could further reduce hiring and potentially calm chronically high inflation, which could allow the Federal Reserve to slow the pace of rate hikes.
Analysts have sought to play down the early October rally, which followed a decline of more than 9% last month. Major indices remain in a bear market after falling 20% or more from their most recent highs.
“Wild moves like these can be hard to stomach, but they’re not surprising,” said Lindsey Bell, chief markets and financial strategist at Ally. “It’s natural for some of the biggest up days in the market to cluster around the biggest down days.”
John Lynch, Chief Investment Officer of Comerica Wealth Management, said the optimism could be misguided as inflation remains stubbornly high.
“Investors should be worried about false positives,” he said. “Beware of the history of bearish rallies, they can be very seductive.”
Major indexes could be in store for more declines to come, Lynch said, as more economic data and the next round of earnings reports paint a clearer picture of how inflation continues to affect stocks. business transactions and consumer spending.
The S&P 500 rose 112.50 points to 3,790.93, while the Dow gained 825.43 points to close at 30,316.32. The Nasdaq rose 360.97 points to 11,176.41 and the Russell 2000 added 66.90 points to 1,775.77.
Yields on Treasuries continued to retreat from their multi-year highs, helping to relieve some of the pressure on equities. The 10-year Treasury yield, which helps set rates for mortgages and many other types of loans, slipped to 3.64% from 3.65% late Monday. It hit 4% last week after starting the year at just 1.51%.
The two-year Treasury yield, which more closely tracks expectations for Federal Reserve action, fell to 4.10% from 4.12% late Monday.
The market was pretty quiet with corporate news ahead of the next round of corporate earnings.
Cruise operators were among the biggest gainers in the S&P 500. Norwegian Cruise Line jumped 16.8%, Royal Caribbean 16.7% and Carnival 13.3%.
Investors are watching closely as central banks raise interest rates to make borrowing harder and slow economic growth in an attempt to tame inflation. Investors are hoping they will eventually ease their aggressive rate hikes and the Australian central bank’s move is a hopeful sign for some.
Wall Street worries that rate hikes, especially those by the Fed, could go too far in slowing growth and sending economies into recession. The Fed has already pushed its main overnight interest rate to a range of 3% to 3.25%, from virtually zero as recently as March.
Economic growth is already slowing globally and the US economy contracted in the first two quarters of the year, which is seen as an informal signal of recession. The economy still has several pockets of strength, including employment.
Wall Street will get a more detailed look at the job situation in the United States this week, with a report on hiring by private companies due out on Wednesday, the latest tally of weekly jobless claims on Thursday and the government’s monthly employment report for September on Friday.
If those reports point to a still-strong labor market, it could trigger a sell-off in the bond market, which would weigh on stocks, said Jay Hatfield, CEO of Infrastructure Capital Advisors.
“All of these could hit the stock market because right now the bond market is really driving the stock market,” he said.
Yuri Kageyama and Matt Ott contributed to this report.
Damian J. Troise and Alex Veiga, The Associated Press