Markets settle after Monday’s sell-off
CALM returned to global markets Tuesday starting in Japan with that country’s market soaring more than 10 per cent to claw back much of its losses from Monday, a day its Nikkei slumped more than 12 per cent — its worst day since 1987, according to a report from the Associated Press, a news agency.
The S&P 500 and the Nasdaq ended 1 per cent higher Tuesday as investors in the US jumped back into the market after a dramatic sell-off, also on Monday. Stocks tumbled more than 6 per cent the previous day on worries that the Federal Reserve, the US central bank’s policy of higher interest rates for too long to beat inflation, is pushing the world’s largest economy into a recession. Analysts viewed weak jobs numbers in July as a sign the pressure is building.
However, U.S. central bank policymakers have pushed back against the idea that weaker-than-expected July jobs data means the economy is headed for a recession, but they have also warned that the Fed will need to cut interest rates to avoid such an outcome.
Stronger-than-expected profit reports from several big U.S. companies helped drive the market. Kenvue, the company behind Tylenol and Band-Aids, jumped 14.7 per cent after reporting stronger profit than expected thanks in part to higher prices for its products. Uber rolled 10.9 per cent higher after easily topping profit forecasts for the latest quarter, AP reported.
But Monday’s sell-off, the report pointed out, was not only due to weak economic numbers coming from out of the US. It said some of the sell-off was due to investors, who had borrowed Japanese yen at a low rate to invest across the globe, were exiting their investment positions after the Bank of Japan last week raise its policy rate above virtually zero. The resulting exits from those investments may have helped accelerate the declines for markets around the world.
While fears are rising about a slowing U.S. economy, it is still growing, and many economists see a recession in the next year or so as unlikely. The US stock market is also still up a healthy amount for the year so far, and the Federal Reserve says it has ample room to cut interest rates to help the economy if the job market weakens significantly.
The S&P 500 has romped to dozens of all-time highs this year and is still up nearly 10 per cent so far in 2024, in part due to a frenzy around artificial-intelligence technology. Critics have been saying that euphoria has sent stock prices too high in many cases.
