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Market Snapshot: Dow jumps 400 points as stocks bounce back from worst week since 2020

U.S. stocks rose sharply on Tuesday after a three-day holiday weekend, following the worst weekly performance for equities in more than two years.

What’s happening
  • The Dow Jones Industrial Average DJIA, +1.80% was up 398 points, or 1.3%, at 30,286.
  • The S&P 500 SPX, +2.48% gained 67 points, or 1.8%, to trade at 3,742.
  • The Nasdaq Composite COMP, +3.00% rose 246 points, or 2.3%, to 11,044.

Last week was the worst for the S&P 500 index since the stretch ending March 20, 2020, when the U.S. was first battling the coronavirus pandemic. The Dow Jones Industrial Average ended last week with a loss of 4.8%, the S&P 500 dropped 5.8% and the Nasdaq Composite dropped 4.8%.

What’s driving markets

Investors have been focusing on the surge in inflation which has led the Federal Reserve and other central banks to raise interest rates, as well as on the war in Ukraine that has crippled grain exports and triggered sanctions on energy exporter Russia.

“The risks of a recession are rising, while achieving a soft landing for the U.S. economy appears increasingly challenging,” said Mark Haefele, chief investment officer for global wealth management at UBS.

Haefele said UBS reduced its earnings estimate for S&P 500 index companies for next year by 2% and cut its estimate of forward price-to-earnings to 16.6 from 17.9.

President Joe Biden said Monday that he will decide by the end of the week whether to order a holiday on the federal gasoline tax, as he also said a U.S. recession was not inevitable. Biden spoke with former U.S. Treasury Secretary Larry Summers, who said the jobless rate needs to spike to lower inflation.

A brutal selloff for crypto assets relented over the weekend, with the price of bitcoin BTCUSD, +5.07% up 2.1% near $21,100 after dipping below the $20,000 threshold.

The main U.S. economics release Tuesday is the May existing home sales report, which is expected to show a decline in activity as mortgage rates have surged.

Companies in focus
  • Shares of Kellogg Co. K, +2.36% rose 5.1% after the food company announced a plan to split into three businesses.
  • JetBlue Airways Corp. JBLU, +0.88% continued its quest to buy Spirit Airlines Inc. SAVE, +8.11%, increasing its offer and strengthening its commitment to divest itself of assets to get regulatory approval for the deal. JetBlue increased its offer to $33.50 in cash per Spirit share, up from a previous offer of $31.50. Spirit is considering whether to proceed with a planned acquisition by Frontier Group Holdings Inc. ULCC, +3.10% ULCC or to accept JetBlue’s offer. Spirit shares jumped 10.2%, while JetBlue shares were up 1.6% and Frontier shares gained 3.5%.
Other assets
  • The yield on the 10-year Treasury note TMUBMUSD10Y, 3.285% rose 5.7 basis points to 3.291%. Yields and debt prices move opposite each other.
  • The ICE U.S. Dollar Index DXY, -0.42%, a measure of the currency against a basket of six major rivals, was off 0.4%.
  • Oil futures bounced after the U.S. benchmark on Friday snapped a string of seven straight weekly gains. West Texas Intermediate crude CL.1, +1.58% was up 1.7% near $111.40 a barrel.
  • Gold futures GC00, +0.08% edged down 0.2% to trade below $1,840 an ounce.
  • The Stoxx Europe 600 SXXP, +0.41% and London’s FTSE 100 UKX, +0.34% each rose 0.4%.
  • The Shanghai Composite SHCOMP, -0.26% fell 0.3%, while the Hang Seng Index HSI, +1.87% rose 1.9% in Hong Kong and Japan’s Nikkei 225 NIK, +1.84% gained 1.8%.

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