Markets rebounded strongly on Tuesday as a wave of buying activity washed over Wall Street, enabling stocks to close higher and recoup a portion of the steep losses incurred during Monday’s sell-off.
Starting the day positively, the buying momentum carried through, helping major indices like the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite achieve significant gains by market close. The Dow saw a significant increase, with gains exceeding 200 points, bouncing back from a 700 point loss registered the previous day. In the same vein, both the S&P 500 and the tech-rich Nasdaq Composite also closed the trading day in positive territory.
These gains were driven by a myriad of factors offering renewed optimism to market participants. Firstly, the corporate sector provided a crucial supportive pillar in the form of strong second-quarter earnings reports released by several industry front-runners. Moves by corporate giants such as Apple, and Google’s parent company, Alphabet, to embrace digital transformation in the wake of the COVID-19 pandemic proved to be beneficial in bolstering their earning figures.
Another significant driver was positive economic data. Despite concerns over inflation and slowing global growth, markets were uplifted by positive employment figures which signaled ongoing recovery in the labor market. This, combined with a slight decrease in the 10-year Treasury yield, which eased concerns about inflation and higher borrowing costs, amplified the risk-on investor sentiment.
Sectors that had previously been hard hit during the Monday sell-off, surged during Tuesday’s trading session. Energy, financials, and materials were among the sectors that staged powerful rebounds. Their bullish run signaled a shift in investor sentiment, which had been definitively bearish just a day before, perhaps indicating the market sell-off may have been an overreaction.
Interestingly, a shift was also observed in the bond market. After a rally that witnessed a drop in yields, the tide appeared to turn as bond yields inched higher on Tuesday. This indirectly contributed to the increased investors’ appetite for riskier assets like stocks.
Moreover, the Federal Reserve’s continued commitment to supporting the economy, coupled with a strong earnings forecast for the rest of the year, seemed to offset any lingering concerns about the Delta variant and its potential impact on economic recovery.
On the global front, Asian and European equity markets echoed the majority of their American counterparts, closing higher. Improved sentiment and positive performance in foreign markets undoubtedly lent a hand in lifting Wall Street.
In summary, despite Monday’s sell-off causing jitters in the market, Tuesday’s strong rebound proved once again the remarkable resilience of the market, which continues to adapt and grow in the face of new challenges. With growing optimism carved from multiple supportive avenues, the stock market not only managed to claw back some of its losses but also paved the way for potential further growth.
