Wall Street Rises, Backing Off From Bear Market Territory On Bargain-Hunting

(@ChaudhryMAli88)

Wall Street Rises, Backing Off From Bear Market Territory on Bargain-Hunting

NEW YORK (UrduPoint News / Sputnik - 24th May, 2022) Wall Street closed up on Monday, backing off from bear market territory, as bargain-hunting lifted US stocks from last week's battering despite sentiment remaining fragile on fears of a potential recession.

The three major US stock indices - which included the S&P 500 for the top 500 US stocks, the broad-based Dow Jones Industrial Average and the technology-heavy Nasdaq Composite - closed up by an average of 1.3% after Friday's drop of 3.8%.

The S&P 500 itself settled up 73 points, or 1.9%. at 3,974. On Friday, the index settled at 3,901, flat on the day but down 20% on the year. In general market terminology, any asset down 20% from its most recent high or from any particular period like a quarter or year-end is defined as having entered a bear market. The S&P 500 remained down 17% on the year at Monday's close.

US stocks as a whole fell for a seventh straight week last week - their longest losing streak since the dotcom bust of the mid-1990s - amid fears that there could be a recession from the Federal Reserve's determination to hike interest rates aggressively to beat the worst US inflation in 40 years.

"Today is a bounce from oversold conditions over the last couple of months," Jeff Schulze, investment strategist at ClearBridge Investments, said. "The markets are looking for a tradable bottom here in potentially a bear market rally."

Schulze attributed the rebound to bargain-hunting, particularly in stocks of banks, which he said would be resilient enough to withstand any economic shocks from Federal Reserve rate hikes.

"Banks are in oversold conditions," he said.

"They tend to be very economically sensitive and with the data so far, they are actually holding up. There's some optimism that there has been an overpricing of negativity into the earnings potential for banks over the course of the next couple of quarters."

The Federal Reserve has said it will raise interest rates non-stop and even slow the US economy if necessary to bring inflation down from 40-year highs.

After contracting 3.5% in 2020 from disruptions forced by the coronavirus pandemic measures, the US economy expanded by 5.7% in� 2021, growing at its fastest pace since 1982. But inflation has grown just as fast as the economy, or maybe quicker, with some price gauges showing growth of as much as 8.5% on the year.

Since this year began, US growth has been on a weaker trajectory, coming in at a negative 1.4% in the first quarter as the Russia-Ukraine crisis led to runaway inflation in food and energy prices.

If the economy does not return to positive territory in the second quarter, the United States will technically be in recession going by the definition that it takes just two negative quarters in a row to make up a recession.

Aside from the S&P 500, Monday's rebound in stocks was aided by the Dow's 618-point, or 2%, climb to 31,880. For the year, the Dow, which comprises stocks of 30 large American corporations, remained down 12%.

The Nasdaq rose 181 points, or 1.6%, to finish at 11,535. The index, which tracks some of the most iconic IT companies from to Amazon, Apple, Netflix and Google, is down 26% since the start of 2022. That makes the tech sector the year's biggest loser so far among US stocks.