Stocks recovered some of the last week’s losses in Tuesday trading, accentuated by Monday’s 3% decline in the S&P 500, as investors look to bandage this chilly August in the face of global risk angst and central bank uncertainty.
The Dow's more than 1,000-point dip Monday was its worst since 2022.
The Dow Jones Industrial Average rose about 0.1% at market open Tuesday, the S&P 500 gained 0.4% and the tech-heavy Nasdaq Composite was up 0.5%.
The modest bounceback follows Monday’s brutal selloff which brought the worst single-day drops for the S&P and Dow since September 2022.
The indexes have fallen significantly this month as Friday’s subpar labor market report, fallout from Japan’s rare move to hike interest rates and recession concerns globally came to a head to inspire a major flight from risk for investors.
The Dow is down 5% in August, the S&P 6% and the Nasdaq 7%.
The bond market slumped lightly as investors regained their risk appetite, with 2-year and 10-year U.S. Treasury note yields gaining about 5 basis points apiece—higher yields mean a decline in bond values—though yields are still down significantly compared to last week.
In perhaps the most encouraging news for investors, Wall Street’s fear gauge, the Chicago Board Options Exchange's CBOE Volatility Index (VIX), came down by 16% to 32.37. That’s down about 50% from Monday’s peak of 65.73, indicating traders expect calmer waters ahead. The VIX, which tracks options-implied expected volatility for the S&P over the next 30 days, is still about 5% higher than it was from January 2023 through July 2024, during the stock market boom.
Earlier Tuesday, Japan’s Nikkei index staged a 10% rally, paring much of the losses from Monday’s 12% crash, while other overseas indexes like Hong Kong’s Hang Seng and the U.K.’s FTSE 100 declined less than 1%. The U.S.’ monthly jobs report Friday revealed far weaker employment growth than economists forecasted and an unexpected jump in the unemployment rate to a 33-month high of 4.3%, caused elevated concerns about economic growth, spurring stock losses as the Federal Reserve has yet to indicate it intends to parachute in with a flurry of growth-stimulating interest rate cuts. Simultaneously, Japan’s central bank has taken its most hawkish tone in decades, causing many the unraveling of the so-called “carry trades” in which traders borrowed the Japanese yen at near-zero rates to buy riskier assets overseas, such as American stocks, thus lifting the latter’s prices.
American stocks are still up solidly over a longer timeframe, with the S&P returning 10% year-to-date, 18% over the last 12 months and 29% over the last two years.