Stock market gains resumed Wednesday as investor fears eased, though major U.S. indexes still have a ways to go to recapture all-time highs achieved last month.
Things look far less gloomy Wednesday in the stock market than they did on Monday.
Up about 1.1% shortly after markets opened, the U.S. benchmark S&P 500 is on pace for its second consecutive session of more than 1% gains for the first time since early May, and is already 3.5% higher than its Monday intraday low.
The Dow Jones Industrial Average and tech-heavy Nasdaq also gained, up 0.7% and 1.6%, respectively, as did indexes abroad, with Hong Kong’s Hang Seng, Europe’s Stoxx 600 and Japan’s Nikkei 225 all rising 1% or more in Wednesday trading.
Long-dated bond yields climbed again, as yields for 10-year U.S. Treasury note rose to over 3.9%, up almost 30 basis points since Monday morning as the safer asset became less desirable (higher yields indicate fixed income investors are willing to pay less to buy existing bonds).
The 10-year Treasury’s return to a near 4% yield confirms “there’s no recession looming,” declared Yardeni Research founder Ed Yardeni in a note to clients.
In further evidence of investors’ return to risk, the Chicago Board Options Exchange's CBOE Volatility Index (VIX) fell another 16% to a whopping 65% below its Monday peak, as the VIX, often referred to as Wall Street’s fear gauge as it proxies traders’ confidence in the direction of the S&P over a 30-day period, got back to a more normal level as the odds of a sudden meltdown in equity prices seemingly declined.
U.S. indexes are still well short of their July highs, with the Dow down 5% from its peak, the S&P 6% and the Nasdaq 11%. Still battered the worst are the same massive technology stocks which drove much of the late 2022 to mid 2024 gains, as shares of the likes of Amazon and Nvidia sit more than 15% below their record highs set earlier this summer. Noting the routineness of such corrections in financial markets, Goldman Sachs’s chief global equity strategist Peter Oppenheimer wrote to clients Tuesday the current selloff has “probably not…gone far enough” as public companies’ relative valuations remain historically stretched thin.
Igniting Wednesday’s global stock gains were comments from Shinichi Uchida, the head of the Bank of Japan, that the central bank won’t raise interest rates so long as “financial and capital markets are unstable.” That restores confidence from one of the major drivers for last week and Monday’s stock losses, as stock prices declined as traders backed off of “carry trades” that took advantage of Japan’s near-zero interest rates to borrow capital to buy riskier assets abroad, driving up prices. The other most notable cause of the selloff was Friday’s U.S. jobs report which revealed job growth was far worse than expected and the unemployment rate spiked to a three-year high, sparking recession fears, though some economists noted there’s a strong likelihood the weak July labor market data was more of a blip due to seasonality factors.