(Bloomberg) — A stock selloff that at one point rivaled any of the last two years was wiped out as dip buyers emerged by Monday’s close, the latest breathtaking reversal in markets rattled by geopolitical tensions and the Federal Reserve’s campaign against inflation.
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In a session marked by explosive trading volume and wild market swings, the S&P 500 rebounded after tumbling as much as 4% earlier in the day. Retail, energy and industrial companies led gains in the benchmark gauge. At its worst, the index was more than 10% below its Jan. 3 record, headed for a correction. It escaped that with the late-day surge, closing down about 8% from its peak. The dollar pared its advance, while 10-year Treasuries were little changed.
Concerns over the Fed’s imminent hike have recently weighed on risk assets. Higher interest rates pose little threat to equities, and looking beyond the short-term horizon, there are opportunities for equities to gain even as Treasury yields eventually resume their move higher, according to BlackRock Investment Institute. A team of Oppenheimer strategists led by John Stoltzfus wrote Monday that the stock recovery may come sooner than expected and “it’s time to make shopping lists and look for ‘babies that got thrown out with the bath water.’”
“Look at this oversold condition that we’re in, and the longer-term upward trend that the market is still in, and combine that with the fact that credit spreads are so well behaved right now,” Victoria Fernandez, chief market strategist at Crossmark Global Investments, told Bloomberg Television. “There’s still some support for the equity markets, there’s just going to be quite a bit of volatility.”
Speculators who scrapped bullish bets on the dollar at the fastest pace in more than 18 months are now missing out on the currency’s rally ahead of the Fed decision on Wednesday. Net-long aggregate speculative positions versus major peers have dropped the most since June 2020, according to the latest data from the Commodity Futures Trading Commission.
Read: U.S. Orders Diplomat Families Out of Ukraine Citing War Risk
The North Atlantic Treaty Organization said it would boost its deployments in eastern Europe in a bid to deter a new Russian invasion in Ukraine with the Pentagon announcing it’s put 8,500 troops on heightened alert. Russian President Vladimir Putin has denied he’s planning an attack.
For more market analysis, read our MLIV blog.
What to watch this week:
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IMF launches the World Economic Outlook update Tuesday.
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U.S. U.S. Conf. Board consumer confidence Tuesday.
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Fed monetary policy decision Wednesday.
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EIA crude oil inventory report Wednesday.
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U.S. new home sales, wholesale inventories Wednesday.
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South African Reserve Bank rate decision Thursday.
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U.S. initial jobless claims, durable goods, GDP Thursday.
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Eurozone economic confidence, consumer confidence Friday.
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U.S. consumer income, University of Michigan consumer sentiment Friday.
Some of the main moves in markets:
Stocks
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The S&P 500 rose 0.3% as of 4 p.m. New York time
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The Nasdaq 100 rose 0.5%
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The Dow Jones Industrial Average rose 0.3%
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The MSCI World index fell 0.7%
Currencies
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The Bloomberg Dollar Spot Index rose 0.3%
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The euro fell 0.2% to $1.1324
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The British pound fell 0.5% to $1.3487
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The Japanese yen fell 0.2% to 113.96 per dollar
Bonds
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The yield on 10-year Treasuries advanced one basis point to 1.77%
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Germany’s 10-year yield declined four basis points to -0.11%
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Britain’s 10-year yield declined four basis points to 1.13%
Commodities
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West Texas Intermediate crude fell 1.6% to $83.81 a barrel
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Gold futures rose 0.6% to $1,845.70 an ounce
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