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U.S. Stocks Keep Global Rally Going as Dip Buyers Shed War Fears

U.S. Stocks Keep Global Rally Going as Dip Buyers Shed War Fears

Investors have been waiting for any opportunity to buy the more than 10% dip in U.S. stocks since the start of the year. That chance arrived on Wednesday.

The S&P 500 Index surged 2.6% for its best performance since June 2020 led by strength in info tech and financials. The worst performing S&P sector to decline was energy, which fell 3.2% as oil tumbled almost 11%. Meanwhile, the tech-heavy Nasdaq 100 Index climbed 3.6% for its best day since March 2021. 

“The biggest thing we’ve seen in the last two days is a turn in sentiment,” Alon Rosin, Oppenheimer & Co.’s head of institutional equity derivatives, said in a phone interview. “The market did a really good job of making everybody afraid to buy anything.”

The rally was global as equity indexes around the world rose. The MSCI ACWI Index leaped 2.7% for its best day since May 2020. An index of semiconductor stocks gained 4%, while an airline index spiked 6.6%. Big Tech was strong as Apple Inc. gained 3.5%, Microsoft Corp. jumped 4.6%, Alphabet Inc. advanced 5%, Meta Platforms Inc. increased 4.3% and Amazon.com Inc. rose 2.4%. The five collectively added about $326 billion in market capitalization.

Gains accelerated after a foreign policy aide to Ukraine’s president said the country is open to discussing Russia’s demand of neutrality, though it won’t yield any territory. 

“Things looked really oversold on a short-term basis, and a lot of people were looking for something that looked like a bottom to buy the dip,” said Michael Matousek, head trader at US Global Investors. “While some headlines are positive, there continue to be a lot of risks, and we’ll probably see a lot more volatility.”

U.S. Stocks Keep Global Rally Going as Dip Buyers Shed War Fears

Tech stocks have been among the bigest losers this year, with the group pressured by high inflation and investors bracing for the Federal Reserve to hike interest rates. In addition, Russia’s invasion of Ukraine last month has contributed to spiking commodity prices and further supply chain disruptions, adding to investors’ risk-off sentiment. 

Despite the upbeat trading session, the S&P 500 remains down 10% for 2022, while the Nasdaq 100 is off almost 16%. Indeed, the Nasdaq 100 had its worst day in month on Monday.

“We have seen historically that some of the strongest days in the markets have come following the biggest declines,” said Adam Phillips, managing director of portfolio strategy at EP Wealth Advisors. “For the first time in several days, investors are enjoying some more favorable headlines but the situation remains fluid.”

©2022 Bloomberg L.P.