Stocks rose as a rising tide lifted Wall Street, and calm was restored after Japan's market rose earlier on Tuesday, recovering most of the losses from its worst day, 'The Black Monday' in October 1987.
The S&P 500 saw a 1 per cent increase to end a terrible three-day losing run. It had fallen slightly more than 6 per cent due to a number of worries.
S&P 500 |
The notion that the Federal Reserve had raised interest rates excessively in an attempt to combat inflation by applying too strong of a brake on the American economy.
The Nasdaq composite gained 1 per cent, and the Dow Jones Industrial Average increased by 0.8 per cent amounting to 294 points.
Nasdaq composite |
All types of stocks rose in the exact opposite direction from the previous day, from massive multinationals more reliant on the global economy to smaller businesses that depend on American consumers to continue spending.
Factors behind market move
The top factor is in Tokyo, where the Bank of Japan raised interest rates above practically zero last week, making borrowing more expensive. As a result, a popular trade for hedge funds and other investors started to fall apart.
This confused transaction, in which investors obtained cheap Japanese yen loans and used the money to make other investments across the globe,. It's possible that the withdrawals from those investments hastened the global market decline.
Nikkei fell 12.% on August 5 2024 |
Tuesday saw a 10.2 per cent increase in Japan's Nikkei 225, recovering much of the 12.4 per cent sell-off from the previous day, the biggest since the 'Black Monday' crash of 1987. Tokyo stocks rose as the Japanese yen's value steadied versus the US dollar after several days of steep increases.
US Markets on Japan's rate hike
The primary factor behind the S&P 500 setting so many records this year was the "Magnificent Seven." They acted as a buffer against the depressing effects of high interest rates on weakness in other stock market sectors.
Recently, a string of unimpressive profit reports from Alphabet and Tesla added to the pessimism and caused Big Tech stocks to decline. Due to these worries, Nvidia fell by almost 19 per cent from the beginning of July to Monday. However, on Tuesday, it increased by 3.8 per cent and became one of the main factors driving the market higher.
