Stocks are rising in an extended rally, clawing back more ground

NEW YORK (AP) — The Dow Jones industrial average rose more than 800 points and the S&P 500 had its best day in more than two years on Tuesday as the market regained more of the ground it had 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 advanced. The benchmark index is rising after hitting a year-low on Friday to halt September’s slide.

Twitter rose 22.2% after Elon Musk said he would proceed with a $44 billion acquisition of the social media company, abandoning months of efforts to exit the deal.

The Dow rose 2.8%, while the Nasdaq composite rose 3.3%. Small-cap stocks also rose strongly, lifting the Russell 2000 by 3.9%. The markets of Europe and Asia also grew significantly.

The two-day rally hit markets as investors look for signs that central banks may ease back on their aggressive rate hikes aimed at taming the hottest inflation in four decades. Australia’s central bank raised the interest rate less than the previous ones, and this helped the Australian market to jump 3.8%.

The US government’s jobs report showed that the number of available jobs in the US fell sharply in August compared to July. It’s a sign that businesses may cut back on hiring further and potentially end chronically high inflation, which could allow the Federal Reserve to slow the pace of rate hikes.

Analysts were keen to play down the rally in early October, which followed a more than 9% drop last month. Major indices remain in a bear market after falling 20% ​​or more from recent record highs.

“These wild moves are hard to digest, but not surprising,” said Lindsey Bell, chief markets and money strategist at Ally. “It’s only natural that some of the market’s biggest up days are clustered around the biggest down days.”

John Lynch, chief investment officer at Comerica Wealth Management, said the optimism may be misplaced as inflation remains high.

“Investors should be concerned about false positives,” he said. “Be careful with the history of bear market stocks, they can be very tempting.”

Lynch said major indexes could fall further in the future as more economic data and subsequent earnings reports paint a clearer picture of how inflation continues to affect business operations 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, while the Russell 2000 added 66.90 points to 1,775.77.

Treasury yields continued to slide from their multi-year highs, helping to ease pressure on stocks. The yield on the 10-year Treasury note, which helps set mortgage rates and many other types of credit, fell to 3.64% from 3.65% late Monday. It reached 4% last week after only 1.51% at the start of the year.

The two-year Treasury yield, which more closely tracks expectations of Federal Reserve action, fell to 4.10% from 4.12% late Monday.

The market was mostly quiet with company news ahead of the next round of corporate earnings.

Cruise line operators were among the biggest gainers in the S&P 500. Norwegian Cruise Line jumped 16.8%, Royal Caribbean rose 16.7% and Carnival gained 13.3%.

Investors are watching closely as central banks raise interest rates to make borrowing more difficult and slow economic growth to try to tame inflation. Investors are hoping they will eventually wind down their aggressive rate hikes, and the move by the Reserve Bank of Australia is an encouraging sign for some.

Wall Street worries that rate hikes, especially those by the Fed, could go too far in slowing growth and sending the economy into recession. The Fed has already raised its key overnight interest rate to a range of 3% to 3.25% from virtually zero in March.

Economic growth around the world is already slowing, and the US economy shrank in the first two quarters of the year, seen as an unofficial sign of a recession. The economy still has some strong pockets, including employment.

Wall Street will get a closer look at the US employment situation this week, with a private sector hiring report due out on Wednesday, the latest weekly jobless claims count on Thursday and the government’s monthly jobs report for September on Friday.

If those reports point to a still strong labor market, that could trigger a selloff in the bond market, which would weigh on stocks, said Jay Hatfield, CEO of Infrastructure Capital Advisors.

“All of that could trickle down to the stock market because the bond market is really driving the stock market right now,” he said.