The Dow Jones Industrial Average mounted a big comeback from its 2022 low as the Bank of England said it would buy bonds to stabilize its financial markets, a stunning reversal in the monetary tightening policies implemented this year by most central banks to stifle inflation.
The move stabilized the British pound, which became the center of attention in markets this week as it tumbled to a record low against the U.S. dollar. U.S. Treasury yields retreated from their highest levels in more than a decade, easing concerns that higher rates were choking the economy.
The Dow jumped 548.75 points, or 1.88%, to 29,683.74. The S&P 500 rose 1.97% to 3,719.04, one day after notching a new bear market low. The Nasdaq Composite was up 2.05%, ending the session at 11,051.64.
The Dow and the S&P 500 snapped a six-day losing streak. The Dow is now 19.7% off its 52-week high, while the S&P 500 is 22.8% below its record. The Nasdaq is down 31.8%.
The Bank of England said it would temporarily purchase long-dated UK government bonds in an effort to stabilize its plunging currency. Sterling recovered and was last trading roughly 1.4% higher against the dollar at $1.0881.
The 10-year U.S. Treasury yield ended the day at about 3.7% after earlier breaking above 4% for the first time since 2008.
The rally was broad-based. One notable outlier was Apple which was down about 1.3% after a Bloomberg report, citing people familiar with the matter, said the tech company is ditching plans to increase new iPhone production after demand fell short of expectations.
Some on Wall Street are worried that investors have not priced in an earnings slowdown and the impact of the Federal Reserve’s rate hikes. The S&P 500 breaking below its previous low is a key indicator for some that stocks still have further to fall.
“Our central case is a hard landing by the end of ’23,” Druckenmiller said at CNBC’s Delivering Alpha Investor Summit in New York City Wednesday. “I will be stunned if we don’t have recession in ’23. I don’t know the timing but certainly by the end of ’23. I will not be surprised if it’s not larger than the so-called average garden variety.”
