Dow Jones surges 600 points to reclaim all of Friday's losses as dip buyers return

Benchmark indices on Wall Street staged a rebound and a little more from Friday’s sell-off as dip buyers returned to the market and participants shifted focus to strong earnings reported so far.

The Dow Jones gained 585 points, recovering all of Friday’s losses, while the S&P 500 snapped a four-day losing streak and saw its biggest single-day gain since May. Big Tech stocks, which led the losses on Friday for the Nasdaq, contributed to the 2% surge seen on the index on Monday. Even the Smallcap Russell 2000 index saw gains of 2%.

The US Dollar remained below the mark of 100 after Friday’s sell-off, Oil prices fell after OPEC+ announcing an output increase, while Gold remained above the $3,400 mark on hopes of the US Federal Reserve cutting rates in September.
Analysts at Morgan Stanley believe that any sell-off on Wall Street will emerge as a buying opportunity while Goldman Sachs said that Wall Street executives are sounding more confident of being able to mitigate the impact of tariffs on their respective companies’ profitability.
S&P 500’s earnings have grown by 9.1% so far this quarter, more than triple the subdued expectations prevalent at the start of the season. This is the strongest earnings beat displayed by S&P 500 names since 2021, according to Bloomberg Intelligence.

Chris Larkin at E*Trade from Morgan Stanley noted that a key question now is whether traders will view any signs of economic weakness as a market negative, or as a catalyst for the Fed to cut rates sooner rather than later.

August has started on a topsy turvy note for US markets. Historical data shows that this month has been the worst on average for the Dow Jones in a calendar year, tracing data back to 1988, while it is the second-worst month for the S&P 500 and Nasdaq, as per the Stock Traders’ Almanac.

On the tariff front, the European Commission has paused the countermeasures in response to the US tariffs, that were supposed to take effect from August 7, for a period of six months for talks to continue. As per the deal announced by US President Donald Trump, the EU is supposed to pay a 15% tariff on US exports, but details remain unclear.

“In the near term, risk-on sentiment may need to contend with an economic outlook of slowing growth, elevated inflation, and ongoing policy uncertainty,” said Seema Shah at Principal Asset Management. “So far, companies have navigated the tariff noise without much visible strain, but pressures are likely to grow.”

(With Inputs From Agencies.)