Stocks Jump After Last Week’s Sell-Off, Musk Waffles on Twitter Acquisition

The stock market is rising slightly after last week's brutal sell-off. Meanwhile, Elon Musk continues to waffle on his proposed acquition of Twitter.

The stock market jumped this morning to kick off the truncated week of trading after the S&P 500 posted its worst week since March 2020. So far, this year has been rough for investors. Inflation, the Federal Reserve’s rate hikes, and all-time-low consumer sentiment all pressure the battered economy. Thankfully, the trend could be reversing, at least for the short term. 

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The S&P 500 rose 1.7% Tuesday to start the week of trading. The index lost almost 6% of its value last week, making it the worst performance since lockdowns started during the March 2020 recession. The other two indexes also posted gains. The Nasdaq Composite jumped an impressive 1.9% this morning, and the Dow Jones added 1.5% to its value to keep things interesting. 

Read More: Check out the latest Mind Your Dollars stock and financial news.

Cryptocurrency has also been struggling recently, with Bitcoin briefly dipping under $18,000 for the first time since December 2020, when the token hit a recent low. It’s now trading above $21,000, which is still well under its November 2021 high of above $69,000 per coin. Investor sentiment has hammered the crypto industry, as many former enthusiasts abandon the shaky gamble in favor of more reliable returns. 

Sell-Off Slows Down

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Tuesday’s rising stocks are a relief for investors who have endured a surprising, sustained sell-off across risky assets throughout 2022. The sell-off intensified in the middle of last week when the Fed unveiled a higher-than-expected interest rate hike of 75 basis points. This was the first such hike the Fed had authorized in nearly three decades, shocking some investors who expected the central bank to move more cautiously in its bid to curtail inflation.

Fed chair Jerome Powell will speak before Congress on Wednesday and Thursday. He will likely go over the ways the central bank is trying to stay ahead of inflation. Many analysts fear that rising interest rates will slow the economy enough to create a recession, reflecting how damaging the Fed’s loose monetary policy throughout 2020 and 2021 has been. Financial experts largely called on the Fed to reverse these policies as early as the first quarter of 2021, saying that free-spending policies would cause havoc in the market.

“The most likely outlook is very weak growth and persistently high inflation,” writes a team of analysts for Bank of America. “We see roughly a 40% chance of a recession next year. Our worst fears around the Fed have been confirmed: they fell way behind the curve and are now playing a dangerous game of catch up.”

Recession Fears Echo

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Many analysts are now preparing for a recession in the next year as the price of basic goods continues to soar. American working families are struggling to find any extra cash for discretionary spending, which is negatively impacting retail companies like Target and Walmart. When consumer spending slows, businesses that rely on slim profit margins and high sales volumes are the first to take the hardest hits.

Deutsche Bank predicts that a recession could start as soon as the third quarter of 2022. Goldman Sachs chief economist Jan Hatzius says the firm’s experts “now see recession risk as higher and more front-loaded,” a contrast to some of their earlier statements. Experts say that a recession could also expose the S&P 500 to further losses, as the index has already slipped into a bear market this year. 

Tesla CEO and prospective Twitter buyer Elon Musk shares these concerns, as he told Bloomberg during the Qatar Economic Forum in Doha. “A recession is inevitable at some point,” Musk mused. “As to whether there is a recession in the near term, that is more likely than not.” Musk is also currently tangled in his own financial issues: he’s struggling to wriggle out of his agreement to buy social media company Twitter and is now raising quibbles regarding the volume of bot accounts on the platform.

Musk Raises Bot Concerns Again

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Elon Musk agreed to purchase Twitter back in April for $44 billion, a move that promised to shake up the social media industry. The Tesla CEO has described himself as a “free-speech absolutist,” despite one of his other companies, SpaceX, firing a contingent of workers for posting an open letter criticizing his leadership. Following Musk’s agreement with Twitter’s board, he has found numerous issues with Twitter that he only now wants to discuss, including his assertion that the site is infested with bot accounts.

Musk has also raised concerns regarding the shareholder approval of his proposed takeover. Twitter’s shareholders will vote on the acquisition in late July or August, but it’s unclear whether they’ll agree to the move. Musk also needs to finance some portion of the acquisition with bank loans. While he’s technically the world’s richest person, much of his net worth is currently in the form of shares of Tesla. 

If Musk walks away from the deal, he could face a $1 billion fine and even lawsuits from Twitter. The saga has played havoc with Tesla and Twitter’s share prices, causing them both to fluctuate wildly as Musk flip-flops on the deal.

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