Stock market: Stocks end mixed on Tuesday. Up slightly

New York
CNN Business

The back to backhuge market rallies last week may seem like a distant memory to investors after stocks have slid over the past four days and ended mixed on Tuesday.

The Dow ended its losing streak, gaining more than 35 points, or 0.1%. It was a topsy-turvy trading session, with the Dow Jones gaining over 400 points at one point and dropping to around 130 points earlier in the day.

The S&P 500 and Nasdaq ended the day lower after briefly entering positive territory at midday. The S&P 500 slipped 0.7% and the tech-heavy Nasdaq fell 1.1%. It was the fifth consecutive day in the red for both indices.

There was little news to justify the see-saw action in stocks. No major companies reported profits, nor were there any meaningful economic reports.

Is worried about inflation — and the increased likelihood of the same more huge interest rate hikes of the Federal Reserve – once again spooked Wall Street and sent long-term bond yields upper.

Recession fears are back with vengeance following stark comments on the global economy from JPMorgan Chase

CEO Jamie Dimon and the International Monetary Fund over the past two days.

Anxiety is at a fever pitch as America’s big business get ready to declare your income for Q3 and maybe give some insight into what they expect for Q4 and 2023.

The continued rise in the US dollar could dampen the earnings of blue-chip multinationals. And few see an end in sight for the greenback rally.

“Federal Reserve policy will continue to support the U.S. dollar as tightening is likely to continue with no pivot to easing until material evidence of labor market weakness emerges or inflation returns much further. close to the goal,” said UBS Asset Management strategists Evan Brown and Lucas Kawa. a report on Tuesday.

It is therefore reasonable to wonder if the market has even more room to go down before finally reaching a long-awaited, but seemingly elusive bottom. The S&P500 and Nasdaq both hit new 52-week lows on Tuesday and the Dow isn’t far either.

But investors shouldn’t cavalierly dismiss last week’s strong market gains, even as the bears appear to be regaining control.

History shows that when actions Enjoying gains as dramatic as those of last Monday and Tuesday could be a sign that a bear market bottom may soon be near. The S&P 500 jumped 5.7% combined over the two days.

According to a Tweeter from Charles Schwab’s chief investment strategist, Liz Ann Sonders, who shows data dating back to 1960, the S&P 500 was higher six months later eleven out of fourteen times after the days when the S&P 500 saw consecutive rallies of more than 2.5%.

This included three instances from late 2008 when market volatility was at its peak during the global financial crisis.

Another report from Bespoke Investment Group shows stocks doing even better in the 12 months after two huge days. The S&P 500 is up almost 15% year on year after back-to-back massive rallies, compared to normal historical gains of just 9%.

Yet large market swings show how nervous investors are. The CNN Corporate Fear and Greed Indexwho watches the VIX

volatility gauge and six other measures of market sentiment, sits at extreme fear levels.

But when investors are so generally gloomy, it often presents good long-term buying opportunities.

Louis Navellier, chairman of Navellier & Associates, noted in a report that last week’s market rally was due in part to bearish investors rushing to buy stocks to close out short positions, or downside bets. of the market.

“This short hedging rally that we saw the first two days of October is a big deal. Short hedging rallies are how markets reverse,” he said, noting that stocks “ went from oversold last week to slightly overbought.

So it’s not a huge surprise to see the market ease and return some of the gains from early last week. But it’s also worth noting that the S&P 500 is still slightly higher than its Sept. 30 close, despite recent losses. In other words, investors would have done better not to budge.

Indrani De, head of global investment research at FTSE Russell, warns that investors should not overreact to daily market movements. You could miss rallies like last week if you constantly try to buy only when you think the market has bottomed and sell when things look bleak.

De conceded that “in times of high economic uncertainty…markets will remain in a regime of high volatility.” But she urged investors to look past the bumps.

“It’s not about timing the market,” De said. “It’s time in the market. Its very important.

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