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Fears of Recession Ease as Stocks Rebound

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Stocks bounced back on Friday after a tumultuous week that saw the Dow Jones Industrial Average fall to its lowest in 2019, sending the market trembling amid an escalating US-China trade row.

The Dow finished 306.62 points to 25,886.01, 1.2% higher from Thursday’s 25,578.00.

The modest recovery was driven by a rebound in bond yields, which on Wednesday fell to a 30-year all-time low, and slight gains made by the S&P 500 and the Nasdaq Composite.

At the closing bell, the S&P 500 was up 1.4%, or 41.08 points, to 2,888.68, while the Nasdaq Composite closed 1.7% higher at 7,895.99. Apple and Nvidia also made gains on Friday, which also saw bank stocks reap single-digit profits.

Bank of America edged three percent, while Citigroup also finished 3.5% after a wild week. The SPDR S&P Regional Banking ETF, meanwhile, had its best day so far since June, closing 2.7% higher.

Despite the recovery, the Dow suffered 1.5% in losses mainly due to the massive drop it endured on Wednesday.

Dow, bond yields hit historic lows

The US stocks fell sharply on Wednesday, sending shockwaves to the global market. The Dow lost 800 points, suffering its worst session in the middle of the week, with yields on the 30-year Treasury bond also hitting an all-time low, inciting fears of a recession.

Bond yields broke the two-percent level for the first time. But while the rates remain very low by recent standards, the USD rate remains stable compared to other developed markets.

On Wednesday, former Federal Reserve Chair Janet Yellen said the recent main yield curve inversion might have been driven by several other factors other than market expectations.

“Investors should also bear in mind that the bond market rally looks stretched. An overweight duration stance is vulnerable to any good news that has been sorely lacking in recent months,” strategists at Singapore’s DBS were quoted as saying.

The wild week ended with minimal gains, giving investors a little sigh of relief, but still more reasons for concerns.

August has been a brutally volatile month, with the Dow being mostly affected, having suffered at least 3.6% in losses so far.

Brian Belski, the chief investment strategist at BMO Capital Markets, meanwhile said that though the fluctuation should fuel some concerns, “yield curve inversions do not point to imminent doom for U.S. stocks.”

US-China trade row weighing on the stock market

Intensified tensions between economic giants US and China have been causing unease in the stock market and with investors as well.

There is no end in sight in the meantime.