Dow rallies nearly 1,500 points in two days as fear begins to fade


New York
CNN Business

Is the worst really over on Wall Street? It’s too early to tell. But stocks rose sharply again on Tuesday after Monday’s big rally.

The Dow Jones jumped more than 700 points, or 2.4% at the end of the afternoon. The Dow Jones has climbed nearly 1,500 points over the past two days. It is now back above the 30,000 cap and is about 19% off its most recent high, meaning it is no longer in a bear market.

The S&P 500 and Nasdaq gained 2.7% and 3% respectively. But these two indexes remain in bearish territory, at more than 20% of their historical highs.

It looks like the market bears are going into hibernation, at least temporarily. Even the news of North Korea firing a missile over Japan wasn’t enough to stop the bulls from celebrating.

“It almost feels like a panic rally. The mood in the market got too sour and people started to intervene,” said Callie Cox, US investment analyst at eToro. “But this rally seems random. It’s great to see the stocks go up, but these moves are a little confusing. I am cautious.

Market sentiment has improved on renewed hopes that banking giant Credit Suisse (CS) will be able to avoid a financial meltdown similar to Wall Street firm Lehman Brothers 14 years ago.

There are growing fears that Credit Suisse is in serious trouble. But the bank’s share price has rebounded in the past two days and the cost of insuring Credit Suisse bonds has also fallen. This is a sign that investor concern about the bank’s future has eased somewhat.

The main European stock exchanges have rallied in recent days and nervous investors are relaxing a bit. A fund manager noted that there have been more companies looking attractive lately given the significant pullback in global markets so far this year.

“There are opportunities in Europe. Some companies that we have admired from afar are becoming interesting,” said Louis Florentin-Lee, Lazard International Quality Growth portfolio manager.

In other corporate news, semiconductor stocks received a boost after chip giant Micron (MU) announced plans to spend $100 billion over the next two decades to build a new factory in upstate New York. Shares of Micron (MU) jumped 5%. The other semiconductor companies Intel (INTC), Nvidia (NVDA) and AMD (AMD) have also mobilized.

Shares of Twitter (TWTR) jumped nearly 13% following reports that Elon Musk is again offering to buy the social media site for $44 billion, or $54.20 per share. The stock was halted for pending news.

A lower-than-expected interest rate hike by the Reserve Bank of Australia is also boosting morale on Wall Street. Central banks around the world are raising rates to fight inflation. But economic and market uncertainty could cause the Federal Reserve and other banks to slow the pace of rate hikes.

The concern is that overly aggressive rate hikes could lead to a major recession. CEOs polled by KPMG US expect a downturn over the next 12 months and they fear it will not be mild or short.

But bond investors are now starting to price in the possibility that the Fed will back off from its rate hike spree. The benchmark 10-year US Treasury yield, which briefly climbed to 4% and hit its highest level since 2008 last week, has since fallen and is now back around 3.6%.

Investors no longer seem as worried about the future as they were just a week ago. The VIX (VIX), a key indicator of volatility on Wall Street, fell about 3% on Tuesday.

The CNN Business Fear & Greed Index, which examines the VIX and six other measures of market sentiment, also fell out of Extreme Fear territory. But it remains at the level of fear.

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