Dow rallies more than 1,500 points in two days as fear begins to fade


New York
CNN Business

Is the worst really over on Wall Street? It’s too early to tell. But shares rose sharply again on Tuesday after Monday’s Big Gathering.

The Dow jumped nearly 750 points, or 2.5% in midday trading. The Dow Jones has climbed over 1,500 points in the past two days. It is now back above the 30,000 cap and is around 19% off its all-time high, meaning it is no longer in a bear market.

The S&P500 and Nasdaq 2.8% and 3.2% respectively. But these two indexes remain in bearish territory, at more than 20% of their historical highs.

It appears that the bear market can go into hibernation, at least temporarily. Not even the news of North Korea fires missile over Japan was enough to keep the bulls from celebrating.

Market sentiment improved on renewed hopes that banking giant Credit Suisse

(CS)
will be able to avoid a financial collapse similar to that of Wall Street firm Lehman Brothers 14 years ago.

There have been growing fears that Credit Suisse is in deep trouble. But the bank’s share price has rebounded in the past two days and the cost of insuring Credit Suisse bonds has also fallen. It’s a sign that investors’ concern about the future of the bank has eased somewhat.

Major European stock exchanges rallied in recent days and nervous investors are relaxing a bit. A fund manager noted that there have been more companies looking attractive lately given the significant pullback in global markets so far this year.

“There are opportunities in Europe. Some companies that we have admired from afar are becoming interesting,” said Louis Florentin-Lee, Lazard International Quality Growth portfolio manager.

In other corporate news, Semiconductor stocks surged after chip giant Micron

(MU)
announced plans to spend $100 billion over the next two decades to build a new plant in upstate New York. Micron Shares

(MU)
jumped 5%. Other Intel Semiconductor Companies

(INTC)
Nvidia

(NVDA)
and AMD

(AMD)
joined too.

A lower-than-expected interest rate hike by the Reserve Bank of Australia is also boosting morale on Wall Street. Central banks around the world are raising rates to fight inflation. But economic and market uncertainty could cause the Federal Reserve and other banks to slow the pace of rate hikes.

The concern is that overly aggressive rate hikes could lead to a significant recession. The CEOs surveyed by KPMG US are predict a slowdown in the next 12 months and they fear it will not be sweet or short.

But bond investors are now starting to price in the possibility that the Fed will back off from its rate hike spree. The benchmark 10-year US Treasury yield, which briefly boosted to 4% and hit its highest level since 2008 last week, has since fallen and is now back around 3.6%.

Investors no longer seem as worried about the future as they were just a week ago. The VIX

(VIX)
a key indicator of volatility on Wall Street, fell about 3% on Tuesday.

The CNN Corporate Fear and Greed Index, which examines the VIX and six other measures of market sentiment, also left Extreme Fear territory. But it remains at the level of fear.

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