Investors on Wall Street are breathing a sigh of relief after all three of the major stock indexes finished in the green Tuesday following a three-day slide and Monday’s massive sell-off.
The Dow Jones Industrial Average closed out the day up by nearly 300 points. The S&P 500 and Nasdaq composite also finished the day up by about 1%.
This comes a day after widespread fears of a U.S. recession sent global markets tumbling, with the Dow Jones Industrial Average falling by more than 1,000 points on Monday. The drop followed a dismal July jobs report which showed U.S. hiring fell sharply and the unemployment rate climbed to 4.3% — the highest since October of 2021.
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Much of the volatility is believed to be tied to concerns that the Federal Reserve missed its window to get ahead of a potential recession by announcing last week that it will not reduce federal interest rates from their current 23-year high.
Monday’s massive sell-off prompted calls from many economists for the Fed to hold an emergency meeting to drop rates, but as markets have recovered, many of those calls have eased.
The Federal Reserve implemented a series of interest rate hikes in 2022 and 2023 to combat high inflation, and rates have remained at their highest levels since early 2001 for the last 12 months — between 5.25% and 5.5%.
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However, the Fed said last week that inflation numbers were heading in the right direction. It is possible that interest rates will be lowered at its next meeting in September.
“Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have moderated, and the unemployment rate has moved up but remains low,” the Federal Reserve said in a statement. “Inflation has eased over the past year but remains somewhat elevated. In recent months, there has been some further progress toward the Committee’s 2% inflation objective.”
