US stocks open higher after tech-induced selloff
U.S. stocks rose on Wednesday, putting major indexes on track to recoup some of their losses after selling off sharply the day before.
The S&P 500 gained 1.2% and the Dow Jones Industrial Average gained 0.9%, or about 310 points. The technology-focused Nasdaq Composite rose 1.6%.
On Tuesday, the Nasdaq posted its biggest one-day percentage decline since September 2020, while the Dow Jones lost more than 800 points, as investors digested earnings reports and weighed inflation concerns, the prospect of a rapid tightening of Federal Reserve policy and the spread of Covid-19 in China.
Major US equity indices are now down substantially for the year, with the S&P 500 down 11% and the Nasdaq Composite down 19%. On Tuesday, the Nasdaq closed at its lowest level since December 2020, erasing the gains it had made in 2021. The Russell 2000 Index of small-cap companies closed Tuesday at its lowest level since December 2020.
Investors characterized Wednesday’s rise in U.S. stock futures earlier in the day as a temporary rally. Seema Shah, chief strategist at Principal Global Investors, said she expects the stock market‘s next moves to be either sideways or bearish.
Earnings are “supporting the market to some extent, but I don’t think that’s enough to support it higher,” Ms Shah said. She said her team had moved to a neutral recommendation on their overall equity positions.
“The risks just keep piling up,” she said. “We don’t want to pick up pennies in front of the steamroller.”
Many big companies are reporting results this week, with results expected after Wednesday’s closing bell from companies such as Facebook parent Meta Platforms and Ford..
which this week agreed to sell itself for $44 billion to Elon Musk, is due to report on Thursday.
Nearly 80% of S&P 500 companies that have reported earnings so far have exceeded analysts’ estimates, according to FactSet data. Still, Emily Roland, co-head of investment strategy at John Hancock Investment Management, said investors remain focused on a number of high-profile issues weighing on markets.
“Markets are mostly focused on some of the macro concerns around the Fed’s aggressive tightening policy, as well as this global growth scare playing out,” she said.
Many of these concerns have pushed the dollar to its highest level in more than two years. The dollar tends to strengthen when the global economy is deteriorating and investors expect US growth to outpace that of the rest of the world. Rising interest rates in the United States also generally benefit the greenback, as higher rates attract yield-seeking investors to the currency.
The ICE U.S. dollar index, which tracks the currency against a basket of others, rose 0.7% to 103.06, on track to end at its highest level since January 2017 and even surpass the March 2020 coronavirus-induced market downturn. Including Wednesday, the index rose for all but two of April’s 18 trading sessions.
Meanwhile, the euro fell 0.8% against the dollar to around $1.06, its lowest level since 2017.
In the bond market, the yield on the 10-year US Treasury fell slightly to 2.772% on Wednesday from 2.773% on Tuesday. Recently, investors have been selling bonds in anticipation of higher interest rates, and the yield on the benchmark note remains near its highest level since 2018. Bond yields and prices are moving in opposite directions.
Natural gas prices in Europe rose 4.3%, after jumping more than 20% on Wednesday. The moves came after Russia said it would halt gas flows to Poland and Bulgaria over their refusal to pay on Moscow’s new terms.
Among individual stocks, Tesla added 4.3%, on track to recoup some of its losses after falling 12% on Tuesday, its biggest one-day drop in more than a year. Twitter fell 1.4%, about 9% below the $54.20 per share price Elon Musk and Twitter agreed to in their deal to take the company private.
Microsoft jumped 5.5% after reporting an increase in revenue and profit last quarter on Tuesday as demand for its cloud services and software continued to climb.
Chipotle Mexican Grill added 4.8% after the burrito chain said total revenue rose 16% last quarter due to higher food, beverage and packaging costs, which the company said. company, was partially offset by menu price increases.
Lucid Group gained 4.4% after the company said Tuesday night that the Saudi government had agreed to buy up to 100,000 vehicles over a 10-year period.
By contrast, Google’s parent company Alphabet fell 2.1% after the tech giant reported slower sales growth amid disruptions in digital advertising spending.
Robinhood Markets fell 0.8% after the online brokerage announced it was laying off 9% of its full-time employees. The company is expected to release its results on Thursday.
In commodities, Brent crude, the international benchmark for oil prices, fell 1.3% to $103.20 a barrel.
Overseas, European stocks rose, with the Stoxx Europe 600 gaining 0.8%. Major markets in Asia were mixed, with benchmarks in Japan and South Korea down more than 1% and Chinese indices up.
The CSI 300 index of the largest stocks listed in Shanghai and Shenzhen rose 2.9%, recouping some of its recent losses. In Hong Kong, the Hang Seng index rose 0.1%.
The rebound came after China reported its lowest number of Covid-19 cases in three weeks on Tuesday, and President Xi Jinping stressed the importance of infrastructure for economic growth, singling out transport, energy and water conservation. Stocks of machinery and construction materials jumped.
—Karen Langley contributed to this article.
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