Stocks closed higher on Wall Street Tuesday as some of the most breathtaking moves from a manic Monday reversed course. The S&P 500 rose 64.80 points, or 1.7%, to 3,920.56 after a report showed inflation is still high, though no more than expected. The Dow Jones Industrial Average rose 336.26 points, or 1.1%, to 32,155.40. The Nasdaq composite rose 239.31 points, or 2.1%, to 11,428.15. Several bank stocks bounced back, recovering some of their plunges from a day earlier caused by worries that customers could yank out their cash in the wake of two bank failures, the AP reports. Treasury yields rose sharply, trimming some of their historic drops from the previous day.
Tuesday’s report showed that inflation at the consumer level was 6% in February, versus a year before. That matched economists’ expectations and was a slowdown from January’s 6.4% inflation rate, but it’s still way above the Fed's target. In normal times, that could indeed call for an increase in the size of rate hikes. The trouble for the Fed is that it’s also facing a banking system that may already be cracking due to all of its rate increases from the last year, which came at the fastest pace in decades. The second- and third-largest bank failures in US history have both come since Friday. "The Fed is stuck between a rock and a hard place," says Brian Jacobsen, senior investment strategist at Allspring Global Investments.
Traders rushed Monday to place some bets that the Fed could decide to keep rates steady at its next meeting, instead of accelerating to a hike of 0.50 percentage points as they thought a week ago. Stocks across the financial industry rose Tuesday, recovering some of their steep earlier drops. First Republic Bank jumped 27% after plunging 67.5% over the prior three days. KeyCorp gained 6.9% and Charles Schwab climbed 9.2%. Among other big movers on Wall Street, Facebook's parent company rose 7.3% after it said it expects expenses this year to be lower than earlier forecast. Meta Platforms is cutting workers and eliminating job openings to rein in expenses.
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