Back From the Brink

By Connor Smith |  Monday, May 23 Baby Steps. U.S. stocks continued to tip-toe away from bear market territory on Monday.  The S&P 500 index rose 1.9% to 3,973.75. The market benchmark put some more distance between it and the 3,837-point mark. If the index closed below that level, it would represent a 20% decline from recent highs and herald a bear market. Though the index fell as low as 3,810.32 last week, stocks rallied in the final hours in Friday trading to avoid a bear. Also holding on to Friday's late-afternoon momentum was the Dow Jones Industrial Average, which rose nearly 2%. Of the index's 30 components, 27 rose and 3 fell. The trio of laggard were Home Depot, Dow, and Honeywell International. The Nasdaq Composite rose 1.6% to snap a three-trading-day losing streak. Aside from Friday's momentum, stocks got some good news from the White House, according to Barron's Joe Woelfel and Ben Levisohn. Ben and Joe write: The early move higher was spurred by comments from President Joe Biden that he is considering reducing tariffs on China that had been imposed by the Trump administration, while also announcing a new economic agreement on Monday with 12 Indo-Pacific nations, which represent about 40% of global GDP. The pact is aimed at countering China’s influence. For now, his comment that the U.S. would defend Taiwan in the case of a mainland attack was being shrugged off. “U.S. stocks also look [to head] higher as Pres. Biden said that the U.S. would provide economic support for the Indo-Pacific Economic Framework along with several Asian partners but also made a bold statement committing to the military defense of Taiwan against any attack by China,” writes Ivan Feinseth, chief market strategist of Tigress Financial. “Pres. Biden then softened his statement saying he meant he would provide military equipment and support to Taiwan but not commit U.S. troops.” Another positive signal came from JPMorgan Chase, according to Barron's Carleton English. The banking giant spurred a sector rally after it lifted its 2022 net-interest-income guidance and said it expects to benefit from high single-digit loan growth and rising interest rates. Carleton writes: The rosy outlook is just what bank stocks needed to hear. This year was supposed to be a boon for bank stocks with expectations that the Federal Reserve would lift interest rates. The sector held up remarkably well during the pandemic thanks to a surge in deal making and trading, but 2022 was expected to see bank stocks gain on a return to their bread-and-butter business: lending money at interest rates that are higher than what they pay to borrow. CEO Jamie Dimon also called economy strong, despite "big storm clouds," as he characterized economic risks. Dimon added: "I’m calling them storm clouds because they’re storm clouds, they may dissipate. If it was a hurricane, I would tell you that.” Hopefully Dimon brushed up on his meteorology.

 

DJIA: +1.98% to 31,880.24 S&P 500: +1.86% to 3,973.75 Nasdaq: +1.59% to 11,535.27 The Hot Stock: Ross Stores +9.6% The Biggest Loser: Autodesk -4.1% Best Sector: Financials +3.3% Worst Sector: Consumer Discretionary +0.8%