NEW YORK (AP) – US stocks stormed back from heavy losses in the morning to gains on Monday, the latest round of turmoil for Wall Street.
The S&P 500 rose 24.34 points, or 0.6%, to 4,296.12 after erasing an early loss of 1.7%. Shares of Internet-related companies helped show the way, including Twitterwhich jumped 5.7% after agreeing to sell itself to Tesla CEO and tweeter extraordinary Elon Musk.
The Dow Jones industrial average rose 238.06 points, or 0.7%, to 34,049.46 after previously falling 488 points, while the Nasdaq Composition rose 165.56 or 1.3% to 13,004.85 to lead the market.
Equities have been shaky lately, with the S&P 500 coming after a three-week losing streak, amid concerns about the rapid jump in interest rates coming from the Federal Reserve as it tries to curb high inflation. Strong profit reports for the first three months of the year from large US companies had offered support, but even that looked less solid after some mixed reports and forecasts last week.
Now Wall Street is in the middle of one of the most important stretches of the earnings season. Apple, Microsoft, Amazon and Google’s parent company are all on deck to report this week. And because they are among the largest companies by market value, their movements have the greatest impact on the S&P 500.
Earlier in the morning, US equities were on track to follow the decline of global markets, particularly in China, due to concerns about strict lockdown measures which could squeeze the world’s second largest economy and potentially hurt global economic growth. Shares in Shanghai fell 5.1% while Hong Kong’s Hang Seng fell 3.7%.
China’s capital, Beijing, on Monday began mass tests of more than 3 million people and restricted residents of part of the city to their connections, sparking concerns about a wider shutdown similar to Shanghai. This city has been locked in for more than two weeks, and it has already caused the International Monetary Fund to trim its growth forecast for China’s economy.
Concerns are also high for the U.S. economy, which some investors believe will slow sharply or even fall into a recession due to the large rate hikes that the Fed is likely to push through.
US government bond yields fell on Monday, a reversal of this year’s sharp jump in interest rates. The interest rate on the 10-year Treasury, which affects interest rates on mortgages and other consumer loans, fell to 2.82% from 2.90% late Friday. It has recently been close to its highest level since 2018.
Lower interest rates tend to benefit high-growth stocks the most because investors become more willing to pay high prices when they do not lose much in interest rates if they had bought bonds instead. Gains for several major technology-related stocks were the strongest forces lifting the S&P 500 on Monday, including a 2.4% increase for Microsoft and a 2.9% increase for A shares in Google’s parent company, Alphabet.
Both are set to report their latest quarterly results on Tuesday.
“Today is certainly a very small recovery, but we are early in the earnings season and the big ones are coming (Tuesday) and later in the week,” said Robert Cantwell, portfolio manager at Upholdings.
In addition to their bottom-line profit figures, investors are also looking for a better sense of how large companies in the technology, industry and retail sectors are handling rising inflation and supply chain problems.
“The plane is circling the airport,” Cantwell said. “Volatility will be back, make no mistake.”
Inflation remains a key problem for investors. Investors are worried about whether the Fed will be able to raise interest rates enough to curb inflation, but not so much that it will cause a recession. The chairman of the Federal Reserve has indicated that the central bank may raise short-term interest rates by twice the usual amount at upcoming meetings, from next week. The Fed has already raised its primary day-to-day interest rate once, the first such increase since 2018.
Wall Street will also get some important economic data this week. The Conference Council will publish its survey of consumer confidence for April on Tuesday. The Ministry of Commerce publishes its first quarterly report on gross domestic product on Thursday.