By
Steve Muchoki
April 16th, 2024
Three straight sessions of gains show that investors are gaining confidence in market participation once again following heavy sell-offs in the month of January.
On Tuesday, February 1, the US stocks market posted gains for the third straight day in a row. It looks like investors have got more clarity after the recent FOMC meeting while leaving behind the fears of the quantitative tightening measures of the Federal Reserve which is reflected in the growth of the US stock indices.
US Stock Indices
On Tuesday, the Dow Jones Industrial Average (INDEXDJX: .DJI) surged 273 points or 0.8% closing at 35,405 levels. Similarly, the S&P 500 (INDEXSP: .INX) gained 0.6% closing at 4,546 levels. At the same time, the tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) also made 0.75% gains closing at 14,346 levels. Speaking of this bounce back, Jeff Kilburg, a chief investment officer of Sanctuary Wealth told CNBC:
“After being wildly distracted in the month of January, investors and traders are finally refocusing on earnings season. Seeing some of these beats and improved forward guidance has created a lot of optimism inside of this earnings season, which we kind of neglected due to the fact that the Federal Reserve took the center stage.”
Banking stocks got a major boost following the surge in the benchmark 10-year Treasury yield by 2 basis points. The Treasury Yield has surged back once again above 1.8%. The surge came after the US released its manufacturing data for January showing more signs of rising inflation.
Banking stocks registered the most gains. This includes names Goldman Sachs (NYSE: GS) and JPMorgan Chase (NYSE: JPM) gaining 2.6% and 1.7%, respectively. Another banking giant Well Fargo (NYSE: WFC) also registered 3.3% gains on Tuesday.
However, the tech stocks witnessed a major breather after a long time. Both Netflix and Meta Platforms clocked gains at 7% and 1.8% respectively. google’s parent company Alphabet also made a 1.7% advancement on Tuesday.
Recovering from January Volatility
It looks like the market is finally recovering from the massive volatility that we have seen earlier this month. By last week, the large-cap index S&P 500 had corrected 10% from its recent high. However, it has recovered more than 4% over the last week.
Still, all three indices continue to be in the red one for the month of January. The Dow Jones is down 3.3% over the last month while the tech-heavy Nasdaq has faced a brutal correction at 9.39%.
The January sell-off in the market was following the Federal Reserve signaling its plan of quantitative tightening. Following high inflation data, the US central bank is likely to increase interest rates multiple times this year. The reason behind Nasdaq’s steeper correction is that investors have flocked out of the growth stocks moving into safer bets.
Ed Yardeni, president of Yardeni Research, told CNBC that the last month’s market movement hasn’t turned him bearish. Yardeni added:
“We believe that once the FOMC starts to raise the federal funds rate and details the pace of running off the Fed’s balance sheet, the financial markets will learn to live with tightening monetary policy as long as it doesn’t risk causing a recession”.
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