US stocks rose in volatile trading on Tuesday as investors tried to prevent losses from extending into a fifth day.
An aggressive move by the Bank of Japan to tighten the cap on its 10-year government bond yield rocked markets in early trading, with investors worried that aggressive monetary tightening by central banks around the world could cause a global recession. Last week the US Federal Reserve, the European Central Bank and others raised interest rates.
The S&P 500 (^GSPC) rose 0.2%, while the Dow Jones Industrial Average (^DJI) added 140 points, or 0.3%, around 1:05 pm ET. The Nasdaq Composite (^IXIC) was up about 0.2%. On Monday, all three major averages fell to their lowest closes in six weeks, with the S&P 500 weighed down by falls of more than 1% for Apple (AAPL), Microsoft (MSFT) and Alphabet (GOOG).
In bond markets, US Treasury yields extended a rally, with the benchmark 10-year note topping 3.69%. Elsewhere, the US dollar index fell against a rally in the Japanese yen that followed the Bank of Japan’s rate decision. Oil steadied, with West Texas Intermediate (WTI) crude futures trading around $75 a barrel.
Tesla (TSLA) shares slumped more than 5% as investor concerns mounted around CEO Elon Musk’s leadership following reports that he is seeking his replacement as Twitter chief.
The drop extends a period of heavy losses for the electric vehicle giant. Tesla shares plunged 16% last week, marking its worst week since the start of the COVID-19 pandemic in March 2020, and investors were concerned that Musk’s management of Twitter was diverting their attention. from Tesla.
Wall Street analysts have grown increasingly wary of the company heading into 2023, adding to a brutal month and year for Tesla.
EvercoreISI analyst Chris McNally cut Tesla’s share price target to $200 from $300 on Tuesday, joining bearish views from Goldman Sachs, Wedbush and Oppenheimer.
Expectations of an extended period of tight monetary policy and the likelihood of a recession as a result have dashed investors’ hopes of a year-end rally. December is a historically bullish month for the stock market, but it seems to be anything but this season, with stocks in a steady downtrend after bullish October and November.
“With inflation expected to remain higher than it has been in the past decade and the money supply still near an all-time high, there is still too much liquidity that needs to be drained,” said Megan Horneman, chief investment officer at Verdence Capital Management, in a note. “This means that the days of the Federal Reserve going in and cutting rates to zero at any sign of economic weakness are long gone.
“Instead, expect more volatility in economic growth and potentially more frequent mild recessions over the next decade,” he added.
Investors digested a fresh batch of housing data Tuesday showing home starts and permits for future home construction declined as higher mortgage rates continued to slow activity in the market.
On the earnings side, results from Nike (NKE) and FedEx (FDX) will be released after the close.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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