US equities mounted a strong comeback on Tuesday, rebounding after a three-day slump that had wiped out a significant portion of the market's 2024 gains.
The S&P 500 and the Nasdaq added 1% each and the Dow Jones rose 293 points as investors took a pause from recession fears.
All the sectors ended in the green, with real estate and technology leading the gains.
Among mega caps, Nvidia rose 4.3% after losing 6.4% in Monday's session, Microsoft gained 1.1%, Meta advanced 3.8% and Tesla added 0.9%.
On the earnings front, Palantir Tech spiked 10.4% after surpassing analysts' expectations, Uber Technologies jumped 10.9% following better-than-expected second-quarter results, and Caterpillar rose 3% after reporting earnings that beat Wall Street forecasts.
U.S. stocks continued the bounce, off the lows of a two-day steep sell-off - it was led by the cue of a big bounce in Japanese stocks, and stabilisation in the yen.
With the relative calm in stocks, U.S. yields bounced aggressively, with the 2-year yield up as much as 37 basis points from the lows of just 24-hours earlier. That represents a reversal of safe haven flows.
So is the storm over? Unlikely.
Yesterday, we talked about the collapse in the Nikkei over a three-day period, which was of a magnitude we've only seen three other times over the past thirty years.
Each of those extreme declines was driven by a major event (the Global Financial Crisis, the Tsunami/Nuclear Meltdown and the Covid lockdown response).
Let's take a look at the magnitude of the move in the U.S. 2-year relative to the past …
As you can see to the far right in the chart above, almost 76 basis points over four days in the 2-year yield is an historically extreme move. And again, in the case of the 2-year there are also major policy actions associated with these types of moves, including an emergency inter-meeting rate cut by the Fed back in January of 2008.
With the above in mind, there are few signs of stress in the financial system thus far — but this widening spread between U.S. corporate and U.S. Treasuries yields is one (chart below).
