Is the worst really over on Wall Street? It is too early to say. But the shares rose sharply again on Tuesday morning after Monday’s big rise.
The Dow rose more than 700 points, or 2.4% shortly after the open. The Dow has risen nearly 1,500 points in the past two days. It is now back above the key 30,000 milestone and is about 19% off the record, meaning it is no longer in a bear market.
The S&P 500 and Nasdaq rose 2.7% and 3.1% respectively. But both of those indexes remain in bear territory, more than 20% off their all-time highs.
It appears that the market bears may be hibernating, at least temporarily. Not even the news that North Korea fired a missile over Japan was enough to stop the bulls from celebrating.
Market sentiment has improved on renewed hope that banking giant Credit Suisse ( CS ) will be able to avoid a financial meltdown similar to that of Wall Street firm Lehman Brothers 14 years ago.
There have been growing fears that Credit Suisse is in serious trouble. But the bank’s share price has retreated in the past two days, and the cost of insuring Credit Suisse’s bonds also fell. It is a sign that investor anxiety about the bank’s future has subsided somewhat.
Major European stock markets have risen in recent days, and nervous investors are relaxing a bit. One fund manager noted that there are several companies that look attractive recently given the big decline in global markets so far this year.
– There are opportunities in Europe. There are some companies we’ve admired from afar that are starting to get interesting, says Louis Florentin-Lee, a manager with the Lazard International Quality Growth Portfolio.
A smaller-than-expected interest rate increase by The Reserve Bank of Australia also lifts spirits on Wall Street. Central banks around the world are raising interest rates to fight inflation. But economic and market uncertainty may cause the Federal Reserve and other banks to slow down the pace of interest rate increases.
The concern is that overly aggressive interest rate increases could lead to a significant recession. CEOs surveyed by KPMG US predict a slowdown in the next 12 months, and they are concerned that it will not be mild or short.
But bond investors are now starting to price in the possibility that the Fed will pull back on the interest rate hike. The benchmark 10-year US Treasury yield, which briefly rose to 4% and hit its highest level since 2008 last week, has since fallen and is now back around 3.6%.
Investors no longer seem as nervous about the future as they did just a week ago either. The VIX ( VIX ), a key indicator of Wall Street volatility, fell about 5% on Tuesday. The CNN Business Fear & Greed Index, which looks at the VIX ( VIX ) and six other measures of market sentiment, also moved out of Extreme Fear territory. But it remains at the level of fear.