After a good start to the week, the Dow 30 is up over 400 points, and the Nasdaq Composite index is up by almost 1.85% on Tuesday’s trading session. The market was expected to open higher and now it remains to be seen whether the momentum continues all through the trading session.
On Monday, the Dow Jones Industrial Average increased by about 550 points after a turbulent trading week.
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Likewise, the S&P 500 gained 2.65% for the day. As tech equities recovered, led by companies like Amazon, Meta Platforms, and Microsoft, the Nasdaq rose by 3.43%. Since July 27, it was the tech-heavy index’s finest day.
All three major indices increased during Monday’s rise, and the Nasdaq had its best day since July. While the S&P 500 and the Dow Jones Industrial Average were 23% and 18% below their respective 52-week highs, it also closed more than 34% from that high.
The communication services sector, which was up more than 40% from the crucial level, led all other sectors in closing out more than 10% higher than their 52-week highs. Financials and materials were down more than 22% from their 52-week highs, while tech, consumer discretionary, and real estate were all down more than 32%.
One of the reasons for the bullish sentiments could be the solid earnings reports which are sending stock prices higher. Bank of America rose 6.06% after delivering better-than-expected results, and Bank of New York Mellon gained 5.08% after its own earnings beat.
Another reason could be the news from the UK that may have fuelled the market rally. The newly appointed U.K. finance minister said he would withdraw almost all of the announced tax cuts and an energy subsidy.
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Is the stock market bottom in place or there is more ground to cover on the downside? Investors are keeping a close watch for any indication that the stock market has bottomed and that the recent recovery may mark the beginning of a new bull cycle. Analysts do not agree that the worst is over, and many believe that there is yet more suffering to come. Most analysts are of the view that these are bear market rallies but long-term investors may have already started accumulating quality stocks at current valuations.
Smaller businesses have had a challenging year. According to Peter Oppenheimer, the chief global equity strategist at Goldman Sachs, it has been the worst year thus far for small-cap companies since the year 2000. But he asserted that the market is beginning to appear inexpensive, and he is bullish on a number of international businesses with steady growth and solid profitability.
A few other analysts are also bullish on the large-cap segment of the market. According to Surevest’s chief investment strategist, Rob Luna, “particular stocks have started to outperform and show signs of already bottoming.”
This week marks the start of the third quarter results season. The earnings for S&P 500 businesses as a whole are anticipated to have increased 4.1% from the same quarter last year, which would be the weakest growth since the fourth quarter of 2020. After results are announced by leading banks, Tesla, IBM and American Airlines report their earnings later in the week.
