New York, June 7 (BNA): US stocks rose on Monday as Wall Street continues to grapple with whether the economy will manage to avoid a recession amid rising interest rates and high inflation.
The S&P 500 rose 12.89 points, or 0.3%, to 4,121.43 after swinging through another day of erratic moves, in what has become the norm for markets. The Dow Jones Industrial Average rose 16.08, or less than 0.1%, to 32915.78, and the Nasdaq Composite rose 48.64, or 0.4%, to 12,061.37, the AP reports.
Stocks started the day with bigger gains, with the S&P 500 up 1.5%, with the Nasdaq briefly up 2%. But it fell as Treasury yields continued to rise, adding to the downward pressure on stocks. When safe bonds pay more interest, investors are usually less willing to pay higher prices for stocks, which are riskier.
The yield on the 10-year Treasury jumped again above 3% to 3.04%, up from 2.95% late Friday. It is moving towards its levels since early and mid-May, when it reached its highest level since 2018 on expectations that the Federal Reserve will raise interest rates aggressively in order to rein in the worst inflation in decades.
Such moves will slow the economy by design, and investors are trying to guess ahead of time whether the Fed will move so hard or so fast that it causes a recession.
Economists at Goldman Sachs said in a research note that they still see the Federal Reserve and its chair, Jerome Powell, well on their way to successfully walking the line and engineering a so-called “soft landing” for the economy. That was more encouraging than some of the warnings that persisted in markets last week, including one from Jamie Dimon, CEO of JPMorgan Chase, who said he was preparing for an economic “hurricane.”
The number of job vacancies is beginning to decline, which may reduce some of the pressure that drives wages and leads to higher inflation. Congested supply chains around the world have also improved, although Goldman Sachs economists led by Jan Hatzius still see a 35% risk of a US recession over the next two years.
“Saying that markets are likely to remain range-bound is often a cliché, but we believe it currently has more content than usual because President Powell is focusing so heavily on the role of financial conditions in a smooth landing,” Hatzius wrote.
As it measures financial conditions, the Federal Reserve looks at how prices behave in the stock and bond markets. The S&P 500 is getting close to where it was a month ago, as it falters as investors position and raise bets that the Federal Reserve may pause later this year on its sharp interest rate increases. But stocks have endured significant day-to-day and even hour-to-hour swings during this stretch, and the S&P 500 is still 13.5% lower than where it began the year.
Wall Street’s gains at the start of the week came on the heels of strength in European and Asian stock markets after Chinese authorities eased some COVID-related restrictions.
For example, diners returned to restaurants in Beijing for the first time in over a month. These have eased fears that tough anti-virus measures will slow the world’s second-largest economy and further disrupt global supply chains.
Shares in Shanghai rose 1.3%, Hong Kong’s Hang Seng jumped 2.7%, and Germany’s DAX returned 1.3%.
On Wall Street, companies in the solar energy industry were among the biggest gainers after President Joe Biden ordered emergency measures to ramp up US manufacturing of solar panels and exempt panels from Southeast Asia from tariffs for two years.
Enphase Energy jumped 5.4% and SolarEdge Technologies climbed 2.9%.
Amazon was one of the biggest forces driving the S&P 500 Index higher. It rose 2% after splitting its stock, 20 for 1. Such a move lowers its share price and makes it more accessible to some small-pocket investors, all while leaving its total value alone.
Spirit Airlines rose 7% after JetBlue Airways bolstered its takeover bid in the bidding war for the discount carrier.
On the losing side was Twitter, which fell 1.5% after Tesla CEO Elon Musk threatened to cancel his deal to buy the company, saying Twitter was refusing to hand over data. Musk has been complaining about how many Twitter users are actually bots and fake accounts. Tesla shares rose 1.6 percent.
There can still be significant volatility on Wall Street this week, especially on Friday when the US government releases its latest monthly inflation update.