NEW YORK (AP) – Some calm is returning to Wall Street and U.S. stocks are holding steady after Japan’s stock market rallied early Tuesday, rebounding from its worst loss since 1987.
The S&P 500 was up 0.2% in early trade and on track to snap a three-day losing streak. It fell a little more than 6% after several weaker-than-expected reports raised concerns that the Federal Reserve has been holding the brakes on the US economy for too long with high interest rates to tackle inflation.
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As of 9:43 a.m. ET, the Dow Jones Industrial Average was up 47 points, or 0.1%, and the Nasdaq Composite was down 0.3%.
Stronger-than-expected earnings reports from several major US companies helped support the market. Kenvue, the company behind Tylenol and Band-Aids, rose 13.5% after reporting better-than-expected profit, driven in part by higher prices for its products. Uber tumbled 4.3% after easily beating profit estimates for the latest quarter.
Caterpillar reversed an early loss to a 1.7% gain after reporting better-than-expected revenue but weaker earnings.
Several technical factors could accelerate the markets’ recent decline, in addition to weak US hiring data and other reports, which strategists at Barclays are calling the “perfect storm” to trigger extreme market moves. One is centered in Tokyo, where the trade, a favorite of hedge funds and other investors, began unraveling last week after the Bank of Japan made borrowing more expensive, pushing interest rates above near zero.
That messed up trading, where investors borrowed low-cost Japanese yen and invested it elsewhere in the world. The outflows from those deals could help accelerate declines in markets around the world.
But Japan’s Nikkei 225 jumped 10.2% on Tuesday after a 12.4% sell-off the previous day, the worst since the 1987 Black Monday crash. Tokyo stocks recovered as the Japanese yen steadied slightly against the US dollar. after several days of sharp gains.
“The speed, magnitude and shock factor clearly show” how much traders’ positions are being driven by concerns about the economy, not just the economy, according to Barclays strategists led by Stefano Pascal and Anshul Gupta.
Still, some voices along Wall Street continue to urge caution.
Barry Bannister, chief equity strategist at Stifel, warns that more declines could be in store due to a slowing US economy and persistent inflation. He has been predicting a coming “correction” in US stock prices for some time, including admitting in July that his initial call was premature. That was two days ago when the S&P 500 hit its latest all-time high and then began to sink.
While fears of a US economic slowdown are growing, it is still growing and a recession is far from certain. The U.S. stock market is also still up solidly for the year. The S&P 500 has hit dozens of all-time highs this year, in part because of the frenzy surrounding artificial intelligence technology, and critics say the prices look too expensive.
Elsewhere, European markets were largely left out of the recovery, with stock indexes in Germany, France and the United Kingdom falling modestly.
AP Business Writers Elaine Kurtenbach and Matt Ott contributed.