• September 24, 2022

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Topline

The stock market rebounded for a second day in a row on Thursday, on track to snap a seven-week losing streak, as recession fears cooled amid a slew of strong quarterly earnings reports that boosted investor sentiment.

Key Facts

Stocks moved higher as investors continued to assess the minutes from the Federal Reserve’s latest policy meeting: The Dow Jones Industrial Average rose 1.6%, over 500 points, while the S&P 500 gained 2% and the Nasdaq Composite 2.7%.

Despite seven straight weeks of losses pushing the S&P 500 briefly into bear market territory last Friday, stocks are on track to post a strong rebound this week: The Dow and S&P 500 are up over 4% and the Nasdaq more than 3%.

“Last week’s doom and gloom about the all-important U.S. consumer may have been overdone, along with the dire recession headlines,” says Quincy Krosby, chief equity strategist for LPL Financial, about the recent market rally.

Retail stocks, which were initially hard-hit during earnings season after profit warning from major companies like Walmart and Target, continued to rebound on Thursday amid strong showings from the likes of Macy’s and Williams Sonoma, shares of which rose over 10% each.

Discount retailers Dollar Tree and Dollar General jumped 20% and 14%, respectively, after similarly solid quarterly results, which also helped boost sentiment and reverse some of the steep selloffs in the retail sector last week.

Solid earnings results in recent days, especially from retailers, have helped “quell some of the deafening ‘recession’ talk that permeated the market these last few weeks,” says Vital Knowledge founder Adam Crisafulli.

Crucial Quote:

“Markets continue to be volatile, with close attention being paid to fundamentals, including consumer spending and corporate earnings,” says Nationwide chief of investment research Mark Hackett. “The durability of those factors will determine if we are close to a bottom or can expect continued volatility.”

Key Background:

The latest Fed minutes released Wednesday show that central bank officials agree on the need for aggressively tighter monetary policy, with most in favor of raising interest rates by 0.50% intervals at the upcoming policy meetings in June and July. Stocks have undergone a relentless selloff this year as investors remain fearful about surging inflation and the prospect of rising rates leading to a possible recession. The S&P 500 is down over 15% in 2022, while the Dow has fallen over 10% and the Nasdaq over 25%.

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What To Watch For:

“Down 16.5% after 100 days for the S&P 500 is the worst start to a year since 1970 and one of the worst starts ever,” says LPL Financial chief market strategist Ryan Detrick. “But the good news is previous bad starts have seen some nice rubber band snap backs and 2022 could be in line to do it once again.”

Further Reading:

20 Stocks Experts Say Will Help Investors Beat A Bear Market (Forbes)

Retail Stocks Rebound But ‘Feast-Or-Famine Environment’ May Persist Amid Shift In Consumer Spending, Experts Warn (Forbes)

Stocks Rally After Fed Minutes Show Central Bank Will Continue To Raise Rates Aggressively (Forbes)

Stock Market Selloff Resumes As Snap’s 40% Plunge Drags Tech Shares Lower (Forbes)

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