2-7-18 11:33 AM EST | Email Article

By Victor Reklaitis, MarketWatch , Ryan Vlastelica

Analyst: Stocks are adjusting to a world with inflation, but aren't worried about a recession

U.S. stocks were trading solidly higher late Wednesday morning, continuing a recovery from a multiday bout of massive volatility, though investors remained in a period of adjustment to an economic environment marked by both rising bond yields and signs of inflation.

Recent trading has seen huge swings in both directions, though the dominant move over the past week has been lower, something analysts said was to be expected after Wall Street scored big gains in January and throughout 2017.

Check out:Why the Dow has suddenly become a hot mess (http://www.marketwatch.com/story/why-the-stock-market-has-suddenly-become-a-hot-mess-2018-02-06)

What are the main benchmarks doing?

The Dow Jones Industrial Averagefell more than 120 points in early action but soon regained its footing and was up 290 points, or 1.2%, at 25,207. On Tuesday, it jumped more than 2% in its biggest daily percentage gain in two years (http://www.marketwatch.com/story/dow-futures-swing-wildly-in-battle-to-recover-from-historic-selloff-2018-02-06). However, that followed Monday's drop, which was the blue-chip average's largest percentage drop since August 2011 and its biggest-ever point decline (http://www.marketwatch.com/story/dow-suffers-biggest-point-drop-ever-as-stocks-close-broadly-lower-2018-02-05).

The S&P 500climbed 23 points, or 0.9%, to 2,718, with all 11 main sectors trading higher early Wednesday. The Nasdaq Composite advanced 39 points, or 0.6%, to 7,154.

At current levels, the Dow stands 5.3% below last month's record high. The S&P is 5.3% below its own record, while the Nasdaq is 4.6% below its own all-time high.

Read:50-year Wall Street veteran says this sure feels like a stock-market bottom (http://www.marketwatch.com/story/50-year-wall-street-veteran-this-sure-feels-like-a-stock-market-bottom-2018-02-06)

And see:Here's how U.S. stocks typically perform in the aftermath of a major rout (http://www.marketwatch.com/story/heres-how-the-stock-market-typically-performs-in-the-aftermath-of-a-major-rout-2018-02-06)

What are other assets doing?

European stockstraded modestly higher (http://www.marketwatch.com/story/european-stocks-snap-7-day-selling-spree-after-wall-street-rebound-2018-02-07), while Asian markets finished mixed (http://www.marketwatch.com/story/asian-markets-shoot-higher-following-wall-streets-rebound-2018-02-06) after earlier gains faded. Goldand oil futureswere moderately lower, while the ICE U.S. Dollar Indexgained.

What are strategists saying?

"The market was positioned for great earnings, great growth, and no inflation or rates moving up to any meaningful degree. Now that goldilocks environment is gone, and we're back in a normal environment where we're getting both strong growth and higher rates. That readjustment is bringing some jitters," said Alec Young, managing director of global markets research at FTSE Russell.

"We're still in an environment with synchronized global growth--no one is talking about a recession right now--but the days of smooth sailing where the market goes up every day are probably over."

What could help drive markets?

Political worries might pressure the market somewhat, as a partial shutdown of the federal government lies ahead if lawmakers don't agree on spending measures by midnight Thursday.

But the House passed a temporary bill late Tuesday (http://www.marketwatch.com/story/house-passes-temporary-spending-bill-to-avoid-shutdown-2018-02-06), and Senate Majority Leader Mitch McConnell, R-Ky., and Minority Leader Chuck Schumer, D-N.Y., have said they are close to a deal (https://www.wsj.com/articles/house-gop-plans-spending-vote-to-fund-military-1517913000). A brief shutdown (http://www.marketwatch.com/story/trump-signs-bill-ending-government-shutdown-2018-01-22) last month didn't weigh on the market much (http://www.marketwatch.com/story/dow-futures-retreat-as-government-shutdown-stretches-into-3rd-day-2018-01-22).

There are no top-tier economic reports expected Wednesday, but three Federal Reserve officials are slated to make remarks. Chicago Fed President Charles Evans is giving a speech to bankers in Iowa at 11:15 a.m. Eastern time, and San Francisco Fed President John Williams is talking to community leaders in Hawaii at 5:20 p.m. Eastern. New York Fed President William Dudley took part in a panel discussion on banking culture earlier Wednesday.

Check out:MarketWatch's Economic Calendar (http://www.marketwatch.com/economy-politics/calendars/economic)

Which are the key stock-market movers?

Shares of Snapchat parent Snap Inc.(SNAP)surged 39% after better-than-expected quarterly results (http://www.marketwatch.com/story/snap-stock-surges-nearly-30-after-sales-and-earnings-beat-2018-02-06) late Tuesday.

See: A year after IPO, Snap shows progress but still has many issues (http://www.marketwatch.com/story/a-year-after-ipo-snap-shows-progress-but-still-has-many-issues-2018-02-06)

Walt Disney Co.'s stock(DIS)was 0.7% higher after the entertainment giant reported stronger-than-anticipated earnings (http://www.marketwatch.com/story/disney-beats-on-earnings-stock-gains-slightly-2018-02-06) late Tuesday.

Chipotle Mexican Grill Inc.(CMG)tumbled 10% even as the burrito chain's profit topped forecasts and revenue met expectations (http://www.marketwatch.com/story/chipotle-beats-q4-expectations-as-even-avocado-prices-helped-2018-02-06).

See:With Fox merger and ESPN streaming effort, Disney has a confusing mess (http://www.marketwatch.com/story/with-fox-merger-and-espn-streaming-effort-disney-has-confusing-mess-to-sort-out-2018-02-06)

Wynn Resorts Ltd.'s stock(WYNN)rose 10% after Steve Wynn resigned late Tuesday (http://www.marketwatch.com/story/steve-wynn-resigns-as-ceo-of-wynn-resorts-2018-02-06) as chief executive and chairman following allegations of sexual misconduct (http://www.marketwatch.com/story/wynn-resorts-shares-tank-after-report-of-sexual-misconduct-by-owner-steve-wynn-2018-01-26).

Shares in Tesla Inc.(TSLA)rose 3.4% as the maker of electric cars is scheduled to post earnings after the bell. On Tuesday, a Tesla Roadster was launched into space (http://www.marketwatch.com/story/check-out-this-view-as-a-tesla-roadster-hurtles-through-space-2018-02-06) as dummy payload (and as a publicity stunt), sending shares 2% higher.

See:SpaceX successfully launches massive Falcon Heavy rocket (http://www.marketwatch.com/story/spacex-successfully-launches-massive-falcon-heavy-rocket-after-years-of-anticipation-2018-02-06)

And read:7 big worries that could hammer Tesla's stock price (http://www.marketwatch.com/story/7-big-worries-that-could-hammer-teslas-stock-price-2018-02-07)

Media company Tronc Inc.(TRNC)jumped 27% announcing its sale of the Los Angeles Times and the San Diego Union-Tribune (http://www.marketwatch.com/story/tronc-sells-los-angeles-times-other-news-titles-for-500-million-2018-02-07) for $500 million to businessman Patrick Soon-Shiong.

Shares in Hasbro Inc.(HAS)rose 6.1% after the toy maker beat fourth-quarter profit expectations but missed on revenue (http://www.marketwatch.com/story/hasbros-stock-drops-after-profit-beat-but-revenue-missed-2018-02-07), while Michael Kors Holdings Ltd.(KORS)added 4.3% as the fashion house's quarterly profit and revenue topped forecasts (http://www.marketwatch.com/story/michael-kors-earnings-and-sales-beat-expectations-2018-02-07).

 

(END) Dow Jones Newswires

February 07, 2018 11:33 ET (16:33 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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