Stocks rise after the S&P 500’s worst week since March 2020

US stocks rose on Tuesday as traders returned from a long weekend, with shares looking to stabilize after the S&P 500’s worst week since March 2020.

The S&P 500 advanced about 1.7% just after the market opened to trim some losses after falling 5.8% last week. The Nasdaq Composite gained about 1.9% and the Dow added more than 400 points, or 1.5%.

bitcoin (USD-BTC) rose back above $21,000 after a cryptocurrency crash briefly sent prices below $18,000 for the first time since December 2020 over the weekend. Treasury yields rose, with the benchmark 10-year yield rising to almost 3.3%, and US crude oil prices rose 1.5% to top $111 a barrel.

Tuesday’s early recovery rally in risk assets came as a brief respite amid weeks of strong selling. The S&P 500 plunged into its first bear market since the height of the pandemic last week, with the selloff rising further after the The Federal Reserve unleashed a larger-than-normal 75 basis point interest rate hike and signaled that it would be willing to tighten further and at the expense of some economic growth to reduce runaway inflationary pressures.

Federal Reserve Chairman Jerome Powell will deliver his semi-annual address to Congress on Wednesday and Thursday, during which he is likely to be pressed by lawmakers on the Fed’s actions to reduce inflation and the extent to which these can affect the economy. .

And already, concerns about the resilience of the economy have risen sharply. Several economists at major Wall Street firms lowered their growth forecasts in recent days to reflect a heightened recession risk. A recession is generally defined as two consecutive quarters of negative GDP growth, although the final decision is made by the National Bureau of Economic Research (NBER).

“The most likely outlook is very weak growth and persistently high inflation,” Bank of America economists wrote in a note on Friday. “We see about a 40% chance of a recession next year. Our worst fears around the Fed have been confirmed: They fell far behind the curve and are now playing a dangerous game of catch-up.”

Others have been even more bearish. Deutsche Bank’s base case indicates that a recession will begin in the third quarter of 2023, following sluggish real GDP growth of just 1.2% in the US in 2022, down from 1.8% seen previously. Goldman Sachs economists “Now they see the risk of recession as higher and with more initial burden,” the firm’s chief economist, Jan Hatzius, said in a new note. He raised his probability of recession from 15% to 30%.

Rising risks of a formal recession in the US economy also leave the S&P 500 vulnerable to further declines, even after falling more than 22% so far this year. S&P 500 bear market declines since World War II have averaged 29.6% with a median duration of 11.4 months, according to data from Ryan Detrick of LPL Financial. However, when bear markets coincide with recessions, the S&P 500 tends to drop 34.8% on average at its bear market trough and lasts nearly 15 months.

NEW YORK, NEW YORK - JUNE 16: Traders work on the floor of the New York Stock Exchange (NYSE) on June 16, 2022 in New York City.  Stocks fell sharply in morning trading as investors reacted to the Federal Reserve's biggest rate hike since 1994. (Photo by Spencer Platt/Getty Images)

NEW YORK, NEW YORK – JUNE 16: Traders work on the floor of the New York Stock Exchange (NYSE) on June 16, 2022 in New York City. Stocks fell sharply in morning trading as investors reacted to the Federal Reserve’s biggest rate hike since 1994. (Photo by Spencer Platt/Getty Images)

Moving

winners

  • Kellogg (k) shares rose more than 5% after the opening bell Tuesday morning after the company Announced planned divide into three separate companies. The newly spun-off firms will comprise a separate global snack company, a North American cereal firm and a plant-based foods company.

  • Tesla (TSLA) Shares rose after CEO Elon Musk said the company’s headcount would only be cut by 3.5% in the short term, or a smaller percentage than previously expected. Musk confirmed that 10% of Tesla’s salaried workers would be cut in the next three months, but continued hiring would keep the net reduction to just 3-3.5%, he told Bloomberg News on Tuesday.

  • Amazon (AMZN) shares rose nearly 2% as badly hit tech stocks clawed back some recent losses. Stocks have fallen in 10 of the last 12 weeks, as investors have turned away from pandemic-era technology and growth winners are seen among those vulnerable to rising rates.

Decliners

  • adobe (ADBE) Shares fell after Morgan Stanley downgraded the stock to equal weight from Overweight and lowered its price target to $362 from $591 a share, or the lowest among major Wall Street firms, according to Bloomberg. Analyst Keith Weiss cited his expectations of structurally slower growth for the company as the reason for the downgrade, which came on the heels of Adobe’s latest earnings report last week.

This post will be updated.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.

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