Main US indexes rally; Nasdaq, up ~3%, out front
All S&P 500 sectors green; Cons Disc, up ~4%, leads
Dollar gains; crude up ~3%; bitcoin up ~4%; gold off ~1%
US 10-Year Treasury yield dips to ~4.38%
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STOCKS MAY NEED TO RETEST LOWS FOR RALLY TO HOLD
“Market lore has it that every significant low needs a retest. That’s not always true, but it is likely correct now,” is the conclusion that analysts at DataTrek Research have come to as U.S. stock markets rebound.
The S&P 500 .SPX has recovered some of its recent losses, after hitting a more than 14-month low of 4,835.04 on April 7. For this to hold, however, “investors must see enough of a trade policy shift to give them hope that the worst has passed,” said Nicholas Colas, Co-founder at the firm.
Colas notes that several previous market lows have not required a retest, including ones made on October 9, 2002, the end of the 2000-2002 bear market, March 9, 2009, the end of the 2008-2009 bear market, and on March 23, 2020, the end of the first quarter 2020 pandemic bear market.
But in these instances, there were supportive policy efforts to underpin the market, namely Congress approving military action against Iraq in 2002, and government fiscal reforms to support the U.S. economy in 2009 and 2020.
“Genuine lows are set when investors feel that changes in government policy are either adequate to address the challenges of the day or at least provide clarity on the scope of those problems” Colas said.
Given the amount of uncertainty in the market today, that means that stocks will likely need to retest the lows, Colas said. And “US large caps will be much more likely to hold if the administration calms its rhetoric on trade or can show some progress on negotiations, restoring confidence that policy is becoming more predictable.”
(Karen Brettell)
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