Market Snapshot: Dow edges 200 points higher, stocks attempt to bounce after Bank of Japan policy surprise adds to jitters

by | Dec 20, 2022 | Stock Market

U.S. stocks turned higher in early afternoon trade Tuesday, as investors gauged whether the recent losing streak in equities has been overdone. Traders also weighed the potential rippled effects of the Bank of Japan’s surprise announcement to put a higher ceiling on government bond yields.How are stocks are trading
The S&P 500
SPX,
+0.05%
rose 18 points, or 0.5%, to 3,835.

The Dow Jones Industrial Average
DJIA,
+0.21%
was up 217 points, or 0.7%, at 32,973.

The Nasdaq Composite
COMP,
-3.32%
was up 34 points, or 0.3%, to 10,580.

Stocks fell for a fourth straight session on Monday. The Nasdaq Composite was down 6.3% over that stretch, and has retreated 32.6% so far this year.

What’s driving markets Wall Street is looking to avoid a fifth straight losing session, while investors weighed the implications of a surprise monetary policy shift by the Bank of Japan. The S&P 500 closed the previous day near a six-week low as concerns intensify that central banks’ hiking of borrowing costs to combat inflation will push economies into recession and cause corporate earnings to fall. The Bank of Japan had been an outlier among major central banks by having maintained rates at the zero lower bound, while others embarked on their biggest tightening cycle in a generation, noted Henry Allen, strategist at Deutsche Bank. But on Tuesday the BoJ doubled the cap on the country’s 10-year bond
TMBMKJP-10Y,
0.417%,
from 0.25% to 0.5%, causing the yen to jump more than 3%, while whacking equities in the region and giving U.S. stock investors more to consider. The ICE U.S. Dollar Index 
DXY,
-0.70%,
 a gauge of the dollar’s strength against a basket of rivals, down by 0.8% to 103.86. See: Why the Bank of Japan’s surprise policy twist is rattling global markets The BoJ kept its short-term interest rate at minus 0.1%, but the raising of the yield at which it will allow bonds to trade was seen as a step towards the ending of its era of ultra-loose monetary policy. The Nikkei 225
NIK,
-2.46%
fell 2.5%. “That was like the last holdout on global yields and really the last anchoring of global yields. So to see that [cap on its 10-year bond] moves up, even though they [BoJ] are specifically saying this is not a rate hike, they’re trying to improve market functioning,” said Victoria Fernandez, chief market strategist, Crossmark Global Investments, via phone. The 10-year U.S. Treasury yield
TMUBMUSD10Y,
3.687%

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