Market Recap: Stocks Rebound from 3-Day Rout
US stocks staged a solid comeback on Tuesday, snapping a three-day losing streak that had erased a significant portion of the market’s 2024 gains. The S&P 500 and Nasdaq Composite led the charge, each rising about 1%, while the Dow Jones Industrial Average closed up around 0.8%, or roughly 300 points. The rebound was driven by a reassessment of the US economy and the path forward for interest rates. Despite concerns over the labor market and the Federal Reserve’s decision to hold rates at a 23-year high, investors appeared to take a more optimistic view, with the CBOE Volatility Index (VIX) falling back to levels seen in 2022.
Earnings and Economic Data
Some of the market’s biggest names also saw a resurgence, with Nvidia, Tesla, and Microsoft rising between 1% and 4%. Cryptocurrencies, which had been battered in the recent sell-off, also rose in tandem with the broader market, with Bitcoin breaking back above the $55,000 level. However, not all stocks were winners, with Airbnb falling 13% in after-hours trading after the company’s third-quarter revenue guidance missed expectations. The company’s results highlighted the challenges facing the travel industry, with signs of slowing demand from US guests.
Stocks to Watch
Lumen, Uber, and Palantir were among the day’s biggest gainers, with each stock rising between 10% and 85% on positive earnings results. Lumen’s shares soared after the company announced $5 billion in new business deals, while Uber and Palantir both beat earnings expectations and lifted their full-year revenue forecasts. These results suggest that investors are still willing to reward companies that are able to deliver strong growth and profitability, despite the broader market volatility.
Federal Reserve and Interest Rates
Looking ahead, investors will be closely watching the Federal Reserve’s next move, with around three-quarters of traders now expecting a 50-basis-point rate cut at the Fed’s next meeting. However, Apollo Global Management chief economist Torsten Sløk cautioned that investors should take the market’s projections with a “grain of salt,” pointing to data showing consumers are still spending on activities like flights, dining out, and hotel stays. The Fed’s decision will be closely watched, as it will have a significant impact on the direction of interest rates and the broader market.
What to Watch Tomorrow
Wednesday’s earnings calendar will be headlined by Disney, which is expected to report its fiscal third-quarter earnings before the bell. Investors will be closely watching the company’s streaming division, which has been grappling with profitability hurdles, as well as its parks business, which has been impacted by slower growth. Disney’s results will provide insight into the health of the consumer and the impact of rising interest rates on the company’s business.
Earnings Calendar
- Disney (DIS) – Fiscal third-quarter earnings before the bell
- CVS Health (CVS) – Second-quarter earnings before the bell
- Humana (HUM) – Second-quarter earnings before the bell
Economic Data
- ADP Employment Report – 8:15 am ET
- ISM Non-Manufacturing Index – 10:00 am ET
- Crude Oil Inventories – 10:30 am ET
Market Outlook
Overall, Tuesday’s rebound suggests that investors are taking a more nuanced view of the US economy and interest rates, and are willing to look beyond the recent volatility to the underlying fundamentals. However, with the Fed’s next move still uncertain, and earnings season in full swing, the market is likely to remain choppy in the coming days and weeks. Investors should continue to monitor the economic data and earnings reports closely, and be prepared for potential volatility in the market.
