Wall Street Roars Back After 2-Year Low, Fueled by Surging Japanese Stocks

NEW YORK — U.S. stocks are showing resilience today, rebounding after Japan’s market recovery earlier in the day.

The S&P 500 surged by 1.6% in midday trading, on the verge of breaking a three-day losing streak. Prior declines were attributed to concerns about the Federal Reserve’s aggressive interest rate strategy aimed at combating inflation.

The Dow Jones Industrial Average climbed 480 points, or 1.2%, by 11 a.m. Eastern time. The Nasdaq composite jumped 1.7%. This positive movement contrasted sharply with the previous day’s downturn, hitting both smaller domestic companies and large multinationals.

Strong earnings reports from several U.S. companies boosted the market. Kenvue, known for Tylenol and Band-Aids, saw a 12.7% increase in its stock price. Uber’s strong quarterly profit lifted its shares by 7.9%. Caterpillar overcame early losses to gain 3.8% thanks to better-than-expected earnings.

Several technical factors contributed to recent market instability. One key issue stemmed from Japan, where last week’s interest rate hike by the Bank of Japan led to a scramble among investors. This caused a chain reaction that added to global market declines.

Japan’s Nikkei 225 index rebounded by 10.2%, recovering from Monday’s 12.4% drop—the worst since 1987. The stabilization of the Japanese yen against the U.S. dollar fueled this recovery.

Barclays strategists Stefano Pascale and Anshul Gupta suggested the rapid market movements were largely influenced by investor positioning, not just U.S. economic concerns.

Nevertheless, caution persists on Wall Street. Barry Bannister, chief equity strategist at Stifel, warned of potential future declines due to persistent inflation and a slowing U.S. economy. He described the market’s dip as more than a temporary issue, advising against premature optimism.

Despite concerns, the U.S. economy continues to grow, albeit slower. The Federal Reserve retains the ability to cut interest rates if necessary. The market remains up significantly for the year, thanks to a surge in artificial intelligence (AI) stocks.

Big Tech stocks like Nvidia and Apple played crucial roles in the S&P 500 reaching multiple all-time highs this year. Yet, recent profit reports from companies like Tesla and Alphabet have stirred pessimism, dragging tech stocks down. Nvidia rebounded by 4.8% Tuesday, while Apple fell by 0.8%, weighing heavily on the S&P 500.

In the bond market, Treasury yields ticked higher, reversing some losses since April. The 10-year Treasury yield rose to 3.86% from 3.78% late Monday, reflecting rising expectations for future interest rate cuts by the Federal Reserve.