Monday’s rebound was the Dow’s best performance since early March and is bringing the index back from “extremely oversold levels,” said analysts at Bespoke Investment Group.
The recent stock market losses came on the heels of last week’s Federal Reserve policy update, which paved the way for a sooner-than-predicted interest rate hike.
The Fed’s projections showed interest rates would increase in 2023, though some central bank officials even think a rate hike would be feasible next year. On Friday, St. Louis Fed President James Bullard said during an interview with CNBC that he believes rates should be raised as soon as the end of 2022.
Higher interest rates are perceived as negative for stocks even if they come on the coattails of a stronger economy because they would mean higher borrowing costs for companies.
For now, however, rates are still low and that won’t change from one day to the next.
Williams repeated the Fed’s chorus that the nation needed to get to maximum employment and see inflation moderately exceeding 2% for some time for the central bank to change its tune.
Pain in the crypto-verse
The drop came on the back of China cracking down further on cryptocurrencies, both in terms of mining bitcoin and trading digital assets.
“Bitcoin needs to expedite transitioning mining out of China,” said Edward Moya, senior market analyst at Oanda.