Stocks rally as inflation cools, bank jitters ebb

STORY: Wall Street’s main indexes staged a respectable rebound on Tuesday as fears of a widespread banking crisis diminished and inflation data showed prices slightly easing.

The Dow gained 1%, the S&P 500 jumped 1.7% and the Nasdaq soared more than 2%.

After the implosion of Silicon Valley Bank and Signature Bank, contagion fears were allayed Tuesday as reassurances by U.S. President Joe Biden and other global policymakers vowed the crisis would be contained.

Financial stocks clawed back some losses, with the S&P 500 Banks index coming back from its steepest one-day sell-off Monday since June of 2020.

And the Labor Department’s monthly inflation report on Tuesday showed prices continued to rise in February, but that the pace of those increases slowed moderately from the month before.

Even so, inflation has a long way to go before approaching the Federal Reserve’s average annual 2% target.

Dryden Pence, Chief Investment Officer of Pence Capital Management, says that puts the Fed in a tough spot as it decides how much to raise rates ahead its two-day policy meeting later this month.

“I think they would have liked to move, maybe gone 50 basis this time – maybe have to back out of that because of the scare around Silicon Valley Bank. And so now they’re in this situation of really trying to figure out, how long are the real lag effects? [FLASH] So the Fed’s got a very difficult decision to make here, is do we keep raising, do we keep pushing until something breaks – or do we try to modulate this a little bit and let the consumer catch up with the Federal Reserve? I mean, nobody told the consumer ‘Don’t Fight the Fed.’ And the consumer is out there spending, and as long as they’re spending, we’re still gonna have inflation.”

Among the day’s individual movers, shares of Facebook parent Meta Platforms rose 7.3 percent after the tech giant announced 10,000 job cuts in its second round of layoffs.

And ride-hailing app rivals Uber and Lyft rose 5.0% and 0.6%, respectively, after a California state court revived a ballot measure allowing the companies to treat drivers as independent contractors rather than employees.