US President Donald Trump has criticised investors for dumping stocks in the sell-off that has gripped global markets in recent days, arguing that good news on the economy should support valuations.
As the global markets recovery gathered pace this afternoon, Mr Trump described the plunge, which saw the Dow Jones drop.
- European markets push higher as US stocks recover from a weak start; Dow Jones rallies 1.1pc
- Trump calls the sell-off gripping markets earlier in the week as a “big mistake”
- FTSE 100 claws back 1.9pc while the DAX and CAC 40 climb 1.6pc and 1.8pc, respectively
- Asian markets rebound but run out of steam late on
- Why global stocks are sinking and what happens next
- Fed will not rescue markets this time, and nor is it necessary
- Market slump: previous biggest one-day falls and how the market fared in the aftermath
- The income-producing shares and funds to buy in a stock market crash
Wall Street’s bond market headache won’t go away.
A 381-point surge on the Dow disappeared by Wednesday’s closing bell as concerns about rising Treasury yields returned. The Nasdaq slumped almost 1%, while the S&P 500 fell modestly.
The stock market appeared to be making a comeback after historic plunges on Friday and Monday. The Dow surged 567 points higher on Tuesday, and at one point Wednesday it was poised for a two-day gain of almost 1,000 points.
But Wall Street is still nervously watching the bond market, where the trouble started last week.
U.S. stocks pulled back on Wednesday after heavy selling lifted the 10-year Treasury yield back to 2.85%, matching a four-year high. The jump came after an auction of 10-year Treasury notes drew less than stellar demand.
Investors fear the rapid rise in Treasury yields this year could signal inflation and faster rate hikes from the Federal Reserve. Higher bond yields also make stocks look less attractive by comparison.
“The global bond bubble is leaking air,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, wrote in a note to clients after the Treasury auction. He said assets like stocks that are valued off of bonds are “vulnerable too.”
While the market failed to hold on to the early gains, the mood has calmed significantly. Extreme fear drove the Dow down by a record 1,175 points on Monday. The VIX (VIX) volatility index fell about 15% on Wednesday after exploding during the market turmoil.
Despite the volatility, analysts believe the fundamental backdrop is solid. Corporate earnings have never been higher, and U.S. and global economic growth has gathered momentum.
“We believe the recent sell-off is a correction rather than the start of a bear market,” Pierre Blanchet, head of multi asset strategy at HSBC, wrote in a report on Wednesday.
Overseas market jitters mostly eased after plunging earlier this week. European markets raced higher, while stocks in Asia were mixed.
The question now is whether “this draws a line under the recent stock market correction or whether this is merely a dead cat bounce,” currency analysts at ING wrote in a report on Wednesday.