Following Monday’s global sell-off, triggered by fears of a U.S. recession and Wall Street’s worst day since 2022, the stock market made a notable recovery.
The Dow Jones Industrial Average climbed 293.66 points, or 0.76%, while the Nasdaq Composite and S&P 500 each increased by 1.03%.
On the previous day, stocks took a significant hit. The Dow dropped 1,033.99 points, or 2.6%, and the Nasdaq Composite and S&P 500 fell by 3.43% and 3%, respectively, marking the worst day for the Dow and S&P 500 since September 2022.
On Tuesday, U.S. stocks bounced back as financial markets regained stability after Monday’s sharp decline. The Dow Jones Industrial Average, which had lost over 1,000 points the day before, rose by 294 points, or 0.8%, closing at 38,998. The S&P 500 increased by 1%, recovering from its steepest one-day drop in over two years, and the tech-heavy Nasdaq Composite also went up by 1%.
The market’s stabilization came after three days of turmoil caused by signs of a slowing U.S. economy and concerns that the Federal Reserve had delayed cutting interest rates. Recent economic data suggests that Wall Street now expects the Fed to implement deeper rate cuts in September and continue with more reductions throughout 2024.
“The rebound in stocks today has lifted spirits,” analysts at Capital Economics noted in a Tuesday report. “Although the risk of a ‘hard landing’ has risen, it’s not the most likely outcome, especially with the Fed expected to ease monetary policy soon.”
A survey by FactSet revealed that all economists now anticipate the Federal Reserve will cut its benchmark rate by 0.5 percentage points at the September 17-18 meeting, doubling the previous forecast of a 0.25 percentage point cut.
The mood was further buoyed by a Monday report from the Institute for Supply Management, which showed that U.S. services growth was slightly better than expected. This growth was led by sectors such as arts, entertainment, recreation, accommodations, and food services.
The U.S. economy continues to expand, and most economists do not predict a recession. The U.S. stock market remains robust, with the S&P 500, Dow, and Nasdaq all posting double-digit percentage gains for the year.