U.S. stocks were higher on Tuesday as the market tried to bounce from a punishing bear market for the tech-heavy Nasdaq and a sharp pullback for the S&P 500.
The Dow Jones Industrial Average jumped 400 points, or 1.2%. The S&P 500 gained 1.8%, while the Nasdaq Composite added 2.4%.
Those gains marked the market’s latest attempt at a recovery following weeks of steep losses. The S&P 500 is coming off a six-week losing streak — its longest since 2011. The Dow, meanwhile, has fallen for seven straight weeks, marking its longest weekly slide since 2001. Year to date, the S&P 500 and Dow are down 14.2% and 10.1%, respectively.
“Our inputs today support the kind of momentum that we saw on Friday and a continuation of that,” said Art Hogan, chief market strategist at National Securities. “But the most important thing for investors is you get to a point where you’ve priced in a lot of worst case scenarios.”
Shares of Citigroup and Paramount Global surged on Tuesday after Berkshire Hathaway disclosed its holdings in the two companies. Citigroup jumped 8.5% after Warren Buffett’s conglomerate revealed it added a nearly $3 billon stake in the struggling bank during the first quarter.
Citi shares have underperformed the rest of the financial sector in the past 12 months, down nearly 34% while the Financial Select Sector SPDR Fund is off by 10% over the same period.
Meanwhile, shares of Paramount Global also surged 15% after Berkshire built a stake worth $2.6 billion in the company as of the end of March.
Elsewhere, semiconductor stocks climbed. Shares of Advanced Micro Devices jumped more than 8% following an upgrade from Piper Sandler, which said the stock looked attractive after falling 34.5% this year. Nvidia’s stock price rose 5%, Qualcomm’s jumped 4% and Micron Technology’s rose nearly 6%.
Travel stocks popped after United Airlines raised its revenue outlook for the second quarter on improved consumer demand. United Airlines’ stock price rose 8%, Delta’s jumped 6.6% and American Airlines’ advanced 7%.
On the economic front, retail sales numbers came in about as expected. Consumer spending on retail rose 0.9% in April, according to the U.S. Census Bureau. Retail sales excluding autos rose 0.6% in April.
Meanwhile, earnings reports from major consumer companies Home Depot and Walmart appeared to convey diverging stories on consumer resiliency amid inflation.
Home Depot shares climbed 2.6% following better-than-expected quarterly results. The home improvement retailer also raised its full-year outlook. In a Tuesday note, Jefferies analysts called the company a “beneficiary of a healthy consumer” committed to remodeling projects.
At the same time, Walmart shares dropped 11% after the retail giant reported an earnings miss because of rising prices. The company raised its sales outlook, but lowered its profit forecast.
On Tuesday afternoon, stocks pulled back a bit from their session highs then slightly rebounded as investors absorbed the latest comments on inflation from Federal Reserve Chairman Jerome Powell during a Wall Street Journal conference.
“If that involves moving past broadly understood levels of neutral we won’t hesitate to do that,” Powell said. “We will go until we feel we’re at a place where we can say financial conditions are in an appropriate place, we see inflation coming down. We’ll go to that point. There won’t be any hesitation about that.”
Some market participants questioned whether stocks can sustain gains amid concerns that the economy could ultimately tip into a recession. They urged investors to be wary of rallies:
“Despite Friday’s sharp bounce, our bearish base case remains firmly intact,” Chris Senyek, chief investment strategist at Wolfe Research, wrote in a Tuesday note. “We’d use rips to get more defensively positioned.”
Others believed any rises would be short-lived:
“Looking at a few historical parallels this bounce could last a week or two and run another few percent (although everything does seem to happen much faster these days due to the speed of technology, information flow, and market access),” Susquehanna’s Chris Murphy wrote in a Tuesday note.