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Stocks are rising Monday, trimming some of their worst monthly loss since the early days of the pandemic, as Wall Street closes a tumultuous January wracked by worries that imminent interest-rate hikes will make everything in markets more challenging.
The S&P 500 was 0.8 percent higher, as of 11 a.m. Eastern time. It’s nevertheless still down 6.8 percent since setting a record exactly four weeks ago and is on track for a loss of 6.3 percent this month. That would be its worst since falling 12.5 percent in March 2020, when it hit bottom after the pandemic suddenly shut down the global economy.
The Dow Jones Industrial Average was up 14 points, or less than 0.1 percent, at 34,739, after erasing an earlier loss of 229 points, and the Nasdaq composite was 2.1 percent higher.
Wall Street has shook this month as investors try to get ahead of a massive shift in markets, where the Federal Reserve is about to start withdrawing the tremendous stimulus it’s pumped into the economy and markets. The wide expectation is for the Fed to begin raising interest rates in March, among other moves to make borrowing money less easy.
But uncertainty about how sharply and how quickly the Fed will move has helped cause severe swings on Wall Street, not just day-to-day but also hour-to-hour. Morning drops for stocks have quickly given way to sharp losses in the afternoon, and vice versa. On Friday, a sudden upturn in the last hour of trading managed to keep the S&P 500 from logging its fourth weekly loss in a row.
The month’s heaviest losses have concentrated on parts of the stock market seen as the most expensive. Much of the focus has been on high-growth technology stocks, which were absolute stars of the pandemic amid expectations they can grow regardless of the economy. Tech stocks in the S&P 500 are down 7.9 percent this month, though they jumped 1.6 percent Monday.
Chipaker Nvidia rose 4.9 percent Monday, for example, though it remains down 18.5 percent for January.
Any time the Fed raises rates, the stock market has historically had at least some difficulty adjusting. When bonds pay more in interest, investors feel less need to reach for stocks and other riskier investments in search of returns. This time, the Fed is also turning off what’s colloquially known as the “money printer” it’s been using to buy bonds to keep longer-term rates low, and it will likely soon remove some of those extra dollars sloshing around the economy.
The market may have an even tougher time than usual with this rate-hike campaign, because the Fed is going to be moving when growth for the economy and corporate earnings may be set to slow, say strategists at Morgan Stanley.
They pointed to what they see as worrying signs in data about U.S. manufacturing, among other factors.
“We remain sellers of rallies and of the view that S&P 500 fair value remains closer to 4,000 tactically,” the strategists led by Michael Wilson wrote in a report. The S&P 500 closed Friday at 4,431.85.
