(Bloomberg) — A bounce in stocks calmed nerves among equity investors, but the fallout from Donald Trump’s political maneuvering continued to shake global markets and rattle US consumers. Yields on German bonds surged as government leaders agreed on a massive defense spending package, while the ultimate haven asset — gold — topped $3,000 for the first time.
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The S&P 500’s 2.1% advance was the biggest since the aftermath of the November presidential election. Not even data showing a slide in consumer confidence prevented the market rebound, following a selloff that culminated in a 10% plunge of the US equity benchmark from its peak. As the safety bid waned, Treasuries joined their German counterparts lower. Bullion erased gains after climbing as much as 0.5% to $3,004.94 an ounce.
The moves capped a week of drama that included Trump’s on-and-off-again tariffs, recession calls, geopolitical talks and concerns over a US government shutdown. Combined with all the questioning around lofty tech valuations, global equity funds saw their biggest redemption this year while sentiment indicators turned bearish – a bullish signal from a contrarian perspective.
“Scared-cat bounce?” said Ed Yardeni, founder of his namesake research firm. “Any day without a Trump tariff comment is a good day for the market. The market is also rallying on relief that there won’t be a government shutdown. We will be more inclined to call a bottom when we see the stock market move higher on a day or days when Trump blusters about tariffs again.”
Despite Friday’s advance, the S&P 500 still saw a fourth straight week of losses — the longest such streak since August. Tech megacaps led gains on Friday, with Nvidia Corp. and Tesla Inc. up at least 3.8%. The Nasdaq 100 climbed 2.5%. The Dow Jones Industrial Average added 1.7%.
The yield on 10-year Treasuries advanced five basis points to 4.31%. A dollar gauge fell 0.2%.
At Piper Sandler, Craig Johnson noted that while negative headlines and sentiment have weighed on equities, markets could experience a 3% to 6% relief rally in the coming months/weeks.
“We are seeing some oversold rally efforts once again,” said Dan Wantrobski at Janney Montgomery Scott. “But we caution folks looking to dive back in at the first sign of stability here: nearly everyone is looking for a bottom and to ‘buy the dip’ at some point, but the current condition of the markets has not implied any real improvement on a technical basis – the tape is simply very oversold at this stage.”
Andrew Brenner at NatAlliance Securities says he gets asked multiple times a day: “Is the worst over?”
“We don’t know. We would like to see a capitulation trade, but the seasonals are starting to turn,” Brenner said. “The end of February to the middle of March is an awful time for equity seasonals.”
Stocks rebounded on Friday after a selloff that shed about $5 trillion from the S&P 500’s value. It took just 16 trading sessions for US stocks to tumble into a correction, leaving a frazzled Wall Street asking just how long the “adjustment period” White House officials have warned about will last.
In the prior 24 instances when stocks have fallen at least 10% from a record but avoided a bear market, it has taken an average of eight months to reclaim an all-time high, according to data from CFRA Research. That would leave the Feb. 19 high intact until mid-October. The average drawdown reached 14% in those cases.
“Corrections are unnerving in the moment, though they are not unusual, and often act as a pressure release valve for overheated markets,” said Mark Hackett at Nationwide. “This will not be the last correction, pullback, or market scare that the bulls will have to face, and yes, an element of caution is warranted.”
To Ross Mayfield at Baird Private Wealth Management, what usually differentiates quicker (often healthy) selloffs from drawn-out bear markets is whether a recession follows.
The 23 non-recession corrections since 1965 averaged a 16% drawdown, he said. Meantime, the eight recession selloffs over that period averaged a 36% drawdown.
“The good news is that despite headwinds, a near-term recession still looks unlikely,” he noted.
Some of the main moves in markets:
Stocks
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The S&P 500 rose 2.1% as of 4 p.m. New York time
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The Nasdaq 100 rose 2.5%
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The Dow Jones Industrial Average rose 1.7%
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The MSCI World Index rose 1.8%
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Bloomberg Magnificent 7 Total Return Index rose 2.8%
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The Russell 2000 Index rose 2.5%
Currencies
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The Bloomberg Dollar Spot Index fell 0.2%
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The euro rose 0.3% to $1.0883
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The British pound fell 0.1% to $1.2935
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The Japanese yen fell 0.6% to 148.63 per dollar
Cryptocurrencies
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Bitcoin rose 5.2% to $84,522.26
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Ether rose 5% to $1,934.54
Bonds
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The yield on 10-year Treasuries advanced five basis points to 4.31%
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Germany’s 10-year yield advanced two basis points to 2.88%
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Britain’s 10-year yield declined one basis point to 4.67%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Denitsa Tsekova, Sujata Rao, Margaryta Kirakosian and John Viljoen.
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