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Dow rises modestly in volatile trading as Wall Street struggles to recover

Stocks fluctuated on Wednesday, after the major averages made a failed attempt at a bounce in the previous session, and as the market prepares to close out the worst first half of the year since 1970.

The Dow Jones Industrial Average was last up by 127 points, or 0.4%. The S&P 500 fell 0.12%, dragged down by cruise stocks. The tech-heavy Nasdaq Composite lost 0.24%.

Investors are still searching for the bottom of a vicious market sell-off as the second quarter comes to an end Thursday. Concern over a slowing economy and aggressive rate hikes consumed much of the first half of 2022, and fears of a recession fears are rising.

“We expect significant volatility this summer, with ‘face-ripping’ short-covering rallies followed by economically-inspired market slumps,” Wells Fargo senior equity analyst Christopher Harvey said in a note Wednesday. “While a much anticipated market ‘washout’ could catalyze a more sustained move higher, we think the market will not sustain a rally until it believes the Fed will toggle from a 50-75bp tightening to a more mundane 25bp increase.”

The S&P 500, which is down about 20% in 2022, is on pace for its worst first half of the year since 1970, when the index lost 21.01%. Meanwhile, on a quarterly basis, both the Dow and S&P 500 are on track for their worst performance since 2020. The Nasdaq is headed toward its worst three-month period since 2008.

On Wednesday, General Mills shares rose 5% after the company topped earnings and revenue forecasts for its most recent quarter.

Tech stocks were among the top gainers in the Dow and S&P. Amazon rose more than 1% after JPMorgan reiterated its overweight rating on the stock and Redburn initiated it at a buy. Meta Platforms, Apple and Microsoft were also up about 1% each.

Meanwhile, Carnival slid 15% after Morgan Stanley cut its price target on the stock in half and said it could potentially go to zero in the face of another demand shock. The call dragged other cruise stocks lower. Royal Caribbean and Norwegian Cruise Line Holdings fell 11% each.

Bed Bath & Beyond shares plummeted more than 21% after the company posted a huge miss on quarterly earnings and revenue expectations and announced its CEO is stepping down.

On Wednesday Federal Reserve Bank of Cleveland President Loretta Mester said she will advocate for a 75 basis point hike to interest rates at the central bank’s July meeting if economic conditions remain the same by then.

“I haven’t seen the kind of numbers on the inflation side that I need to see in order to think that we can go back to a 50 increase,” she told CNBC.

Wednesday’s moves followed steep losses for the major averages the day before. The benchmarks all started the session with strong gains, but disappointing consumer confidence data halted those advances and sent stocks tumbling.

“The overwhelming mentality remains gloomy, with most people just trying to avoid bear-market rallies, convinced the SPX has several hundred points of further downside over the coming months,” wrote Adam Crisafulli of Vital Knowledge, in a note.

Adam Parker of Trivariate Research said although negative earnings revisions are “virtually guaranteed,” the market can still appreciate.

“We think the constitution of the U.S. stock market is superior now than in the past,” he said. “That makes it somewhat unlikely that gross margins for mega/large caps will collapse back to the 1999-2011 levels.”

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