Dow Soars 500 Points As Investors Shake Off Recession Fears

Topline

The stock market had its best day in two months on Wednesday, paring six straight days of losses, as investors reacted positively to stabilizing actions by the Bank of England and indications that less hawkish monetary policy by the Federal Reserve may be on the way.

I’m as giddy as a baby on a swing: The market had its first positive day in over a week Wednesday.

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Key Facts

The Dow Jones Industrial Average rose 1.9%, about 550 points, in its largest single-day rise since July 19 and first positive day since September 19.

The S&P 500 rose 2% a day after setting its 2022 low, while the tech-heavy Nasdaq rose 2.1%.

The trading boost came after the Bank of England announced it will react to market panic by buying long-term bonds early Wednesday, with Sevens Report’s Tom Essaye calling the equity recovery a “near-term relief rally” inspired by the British central bank.

Bond markets also recovered strongly in response, with the two-year U.S. Treasury note falling 19 basis points to 4.1% and the ten-year U.S. Treasury note falling 23 basis points to 3.72%.

Wednesday marked the largest single-day drop for ten-year yields since 2020 and comes after they briefly topped 4% for the first time in more than a decade.

Investors also proved optimistic about a morning speech from Atlanta Federal Reserve President Raphael Bostic, who said he favors hiking rates to between 4.25% and 4.5% before the end of 2022 but admitted it wouldn’t be “appropriate” for the Fed to continue to raise rates until it hits its inflation target, leading Bespoke Investment Group to write in a Wednesday note there are “signs that the recent surge in U.S. rates has reached an extreme and will not continue from here.”

Crucial Quote

Mark Hackett, Nationwide’s chief of investment research, said in a Wednesday statement there “may be a light at the end of the tunnel” and “the degree of pessimism by executives, consumers, institutional investors and retail investors is at historic levels, potentially leading to a contrarian rally.” Wells Fargo senior global market strategist Scott Wren echoed Hackett’s sentiments in a statement, saying, “Financial markets are pricing in much of the bad news we expect to hear in coming months.”

Contra

Billionaire investors Ken Griffin and Stanley Druckenmiller each gave stark recession warnings at CNBC’s Delivering Alpha Investor Summit on Wednesday. Druckenmiller said he’d be “stunned if we don’t have recession” in 2023 and he wouldn’t “rule out something really bad,” while Griffin said ,“It’s just a question of when, and frankly, how hard,” about the odds of a recession.

Big Number

40%. That’s how much shares of biotechnology firm BioGen soared Wednesday after the company disclosed encouraging results of a trial of its Alzheimer’s medication.

Surprising Fact

Apple was the only stock listed on the Dow that dropped Wednesday, falling 1.3% after a report about dampened demand for the iPhone 14 spooked traders, though most analysts pegged the movement as reactionary.