CNBC Posts – After hours Tuesday morning stocks are on the rise. Overnight, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite started a bounce back from the lowest closing levels either index has experienced in nearly two years. All 3 indices rose between 1.1-2% overnight, allowing a respite from consistently red ticker values that have been prevalent for most of 2022. So what does it mean for investors and the economy when the stock market bounces back like this?
Is it the end of investor worries, or is it a dead cat bounce marking the beginning of a sea of red?
What Does This Bounce Mean?
This move is welcome after five straight days of stock drops and a red market, with the S&P 500 closing at its lowest price since 2020. Falling over 20% since its record high, the Dow entered bear market territory after plummeting 300 points on Monday, which is also its lowest closing price since the end of the year back in 2020. We are all feeling these recent bear market trends in our investments and 401k accounts, so any green is a welcome sight, especially if we can keep the big 3 indices out of a bear market and our economy free of recession.
Investors continue to sell off at near record levels, leading to a 32-year low in market breadth. The selling seems to be inspired by a combination of a general overall panic response to the down market and the Federal Reserve’s aggressively increasing interest rates in hopes of curbing a recession, which perhaps is having the opposite effect as we had hoped. In fact, Wall Street has recently expressed concern that these past 6 months of rate hikes might backfire and push the economy into a recession.
“Typically, US investors wouldn’t care too much about something like this, and especially more recently. And so this to me says that now there is this fear that is gripping investors a lot more than it did before. That in turn will lead to a capitulation moment where we really are at a bottom,” said Max Gokhman, CIO at AlphaTrAI.
Crypto Update
In related market news, it appears cryptocurrencies are experiencing a bit of a bounce as well, as Bitcoin rose about 5% to put it back over the coveted $20,000 mark, which was a hard resistance level a couple of years back. Despite the price of Bitcoin jumping to levels well over $50,000 in 2021, the recent surging strength of the US dollar has caused a significant pull-back in all of crypto, bringing Bitcoin down into a trading range ($18,000-25,000) which is about 66% off its all-time high ($67,000).
Crypto generally moves inversely with the US dollar index and proportionality with the rest of the market, particularly tech stocks, so this morning’s trend should feel good for crypto HODlers with hopes for a continued upside all around.