U.S. stocks rose slightly on Tuesday as investors looked forward to a pivotal Federal Reserve meeting.
The S&P 500 rose 0.7%. The Dow Jones Industrial Average gained 128 points, or 0.4%, and the Nasdaq Composite added 0.4%.
Tuesday’s action followed a late rally from the previous session, which saw all three major averages erase sizable losses to close higher for the day.
“For the first time in several days, sellers appear exhausted, and shorts are a bit nervous than longs (there aren’t many people who feel ‘the’ bottom is in, but even bears are anxious about a sharp rebound rally),” Adam Crisafulli of Vital Knowledge said in a note to clients.
Those moves come ahead of a widely anticipated Federal Reserve decision on Wednesday.
Wall Street is largely expecting the central bank to raise rates by 50 basis points this week, while some investors believe expectations of aggressive monetary tightening from the central bank are already priced into markets.
Billionaire hedge fund manager Paul Tudor Jones said on CNBC’s “Squawk Box” Tuesday that, with the Fed tightening and the economy slowing, capital preservation should be the main goal for investors.
“You can’t think of a worse environment than where we are right now for financial assets. Clearly you don’t want to own bonds and stocks,” Jones said.
The benchmark 10-year Treasury yield also climbed to a new milestone on Monday. The bond yield hit 3.01% during the session, its highest point since December 2018. However, it fell back on Tuesday, possibly easing selling pressure on stocks.
Tuesday’s gains were broad in the S&P 500, but led by the energy sector. Exxon Mobil and EOG Resources each rose more than 2%. Defensive sectors such as health care and utilities also outperformed, with Pfizer gained 2.8% after reporting a stronger-than-expected first quarter.
Stocks are coming off a brutal month. April was the worst month since March 2020 for the Dow and S&P 500. It was the worst month for the Nasdaq since 2008.
“We think the data continues to paint a picture of extreme fear and a contrarian opportunity for longer-term investors, even though there is scope for further movement/more downside in the very near term on some gauges,” RBC strategist Lori Calvasina said in a note to clients.
The S&P 500 is trading in correction territory, down about 13% from its record highs, but the size and length of this drawdown is in line with historical corrections, according to LPL Financial.
The expected rate hike comes as there are growing concerns about the global economy, due in part to China’s lockdowns and the war in Europe.
“Markets continue to be hostage to the China Covid-19 response and the geopolitics, which are overshadowing what is still a very resilient fundamental picture,” JPMorgan strategist Mislav Matejka said in a note to clients.
Corporate earnings reports were spurring individual stock moves on Tuesday.
Chegg’s stock price tumbled nearly 30% after the textbook company issued weak guidance for the full year despite exceeding earnings expectations. Expedia and Hilton tumbled 13% and 4%, respectively, after their quarterly reports.
On the positive side, shares of Clorox rose more than 4% after the company’s fiscal third quarter results topped expectations.
Airbnb, AMD, Lyft and Starbucks are expected to report earnings after the bell Tuesday.
On the data front, factory orders for March rose 2.2%, better than expected. Job openings came in at 11.5 million, an all-time high.
