Today’s been another head-scratcher for many investors. This morning, many investors were wondering why stocks were down, yet again, today. However, the question has now shifted to, why are stocks rebounding today?
As always, that’s a difficult question to answer outright. Market sentiment continues to remain bearish, as investors factor in macro forces which are not in their favor. Inflation is still high, and the Federal Reserve is likely to remain hawkish with respect to their monetary policy. I don’t expect that to change anytime soon, and the market seems to agree.
However, this afternoon, bond yields have come down significantly. The benchmark 10-year U.S. Treasury yield has dipped below the psychological 3% threshold today, down 7 basis points in today’s session. This may be the result of buying activity, as well as the view that perhaps the Fed won’t be as aggressive as many think. In either case, that’s generally positive for most growth stocks, which are leading today’s surge.
As of this afternoon the DJIA, S&P 500 and Nasdaq are all in the green.
Let’s dive into what to make of today’s market action.
Why Are Stocks Rebounding Today?
This morning started off negative, with major indices opening red. This came as reports began to circulate that the key Federal Reserve GDPNow tracker shows the U.S. may be on the brink of recession. Generally, two consecutive quarters of GDP losses is what most economists consider justification for a recession. With last quarter’s GDP numbers showing a contraction, one more quarter of such negative GDP could push the economy over this technical level.
Now, this doesn’t necessarily tell investors how bad a recession might be, if we do indeed get one. However, a recession is a recession, and these fears initially stoked early selling pressure this morning.
Additionally, reports this morning that Target (NYSE:TGT) may aggressively look to liquidate inventory has some investors concerned. Indeed, Target was among the retailers which matched consumer demand poorly this past quarter. Today, this stock is down yet again on the news, with worries around the retail sector continuing to filter through to other stocks.
Right now, it’s a difficult market to be an investor. There are few pockets of safety in what appears to be a protracted selloff. Today’s bear market bounce is nice. However, it’s unclear whether this rally can be maintained from here.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
