- the S&P500 and Nasdaq closed in the green today
- Today’s rally marks the first positive day for the stock market this week
- The S&P will still register its sixth weekly decline despite today’s jump
Stocks are finally up today in hopes that the Federal Reserve can indeed succeed in reining in inflation without sending markets into a tailspin. After four days in the red, today’s rise is a welcome surprise for investors hoping for signs of life. the S&P500 closed up around 2.4%, reversing much of this week’s losses. Some even think that today’s jump could mark the end of the 2022 stock market correction.
Earlier this month, Fed Chairman Jerome Powell announced interest rate hikes of 0.5% as an inflation-fighting measure. While Powell suggested further 50 basis point hikes are likely, he also assured investors that the Fed was not currently considering larger 75 or 100 basis point hikes. This may well be part of the argument behind today’s rally.
On Thursday, Powell maintained the importance of bringing inflation down, even saying a short-term hit to financial markets could be a necessary cost.
“The process of reducing inflation to 2% will also include some pain, but ultimately the most painful thing would be if we failed to deal with it. Ultimately, we would have to go through a much deeper recession… The only thing we really can’t do is not restore price stability.The economy doesn’t work for anyone unless you do that.
Stocks so far after five weeks in the red
Financial markets have been in panic mode for months amid impending interest rate hikes and runaway inflation. The spring in particular was disastrous for investors, as the S&P and Nasdaq Compound recorded five straight weeks in the red as fears of worsening market conditions simmered. Today’s jump may prove to be the only bright spot in an otherwise tumultuous past week for equities. However, the S&P is still down slightly from Monday. This will be the sixth consecutive week of decline, the worst since June 2011.
Russia’s invasion of Ukraine apparently only heightened Powell’s worries, as war usually acts as an inflationary force. Add to that the supply constraints created by the sanctions against Russia, and it is not really surprising that investors have been showing some timidity in the markets in recent weeks.
It’s not just about stocks, though. Cryptocurrencies have been a major bear market victim of late, losing hundreds of billions in market capitalization over the past few weeks. The no. 1 crypto by market cap, Bitcoin (BTC-USD), broke below the all-important $30,000 resistance level this week in a crypto-wide selloff, even briefly dipping as low as $26,000 per coin. This comes just months after BTC hit a new all-time high of $67,000 last November, as investors hoped the coin could act as a strong hedge against inflation.
Fortunately, today’s recovery was fairly inclusive. Even crypto is mostly in the green. Bitcoin is up around 4.5% in the past 24 hours, currently hovering around $30,000 per coin at the time of writing.
As of the date of publication, Shrey Dua did not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.