Stocks surged on Tuesday as Wall Street continued to build on the sharp rally seen in the previous session. Bond yields also continued to fall, providing additional support for equities.
All of the major averages were up sharply, with the Dow Jones Industrial Average gaining 670 points, or 2.3%. The S&P 500 added 2.5%, while the Nasdaq Composite was up 2.8%.
These gains put the S&P 500 up 5.3% for the week and on track for its biggest two-day rally since March 2020.
The rally comes as investors remain optimistic about the economic outlook despite recent weakness in key data points. The Federal Reserve also remains committed to supporting the economy, and this has helped to drive down bond yields.
“After falling more than 9% in September and extending its year-to-date decline to nearly 25% as of Friday’s close, we think the S&P 500 was looking oversold,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “In addition, some of last week’s selling pressure may have been driven by quarter-end rebalancing, which has now ended.”
“With sentiment toward equities already very weak, periodic rebounds are to be expected,” he added. “But markets are likely to stay volatile in the near term, driven primarily by expectations around inflation and policy rates.”
Despite the strong gains seen in recent days, it is important to remember that the market is still well below its highs from earlier this year.
Nonetheless, the market has made a significant recovery from its lows set just a few weeks ago, and this is likely to provide continued support in the near-term.
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