After weeks of worrying signals that had investors bracing for a potential recession, Wall Street bounced back in a big way on Tuesday. The Dow Jones Industrial Average surged over 1,200 points, rebounding from steep losses in recent sessions. Other indices also posted handsome gains, bringing some relief to market participants.
The massive rally came despite little change in the underlying economic conditions that have weighed on stocks. Inflation remains persistently high while interest rates continue rising. Corporate profits are also showing signs of slowing. So what triggered this sudden shift in sentiment?
Analysts cite several factors for the upbeat investor mood. For one, some technical indicators had been signaling the market was oversold after the nearly 20% plunge from the January highs. This fueled expectations of a short-term bounce. Additionally, comments from Fed officials reiterating their commitment to taming inflation without derailing growth may have eased recession fears.
While the gains offer a respite, volatility is likely to remain high as uncertainty prevails. Much depends on whether inflation finally starts cooling, allowing the Fed to slow its rate hikes. Corporate results over the coming months will also be key to gauge the economy's underlying strength. Until there are clear signs inflation is peaking, markets could continue seesawing on any data or comments.
