Nikkei Rebounds in Best Day Since 2008

Japanese stocks closed 10% higher Tuesday after tanking 12% yesterday, their worst day since 1987.

Japan’s Nikkei index, whose slide following Friday’s weak soft U.S. jobs report triggered Monday’s global rout, notched its best single-day performance in percentage terms since the average closed up more than 14% on Oct. 14, 2008.

U.S. stock futures also are bouncing back and paring some of their losses from Monday, when fears of a potential recession and worries about the scale of tech giants’ spending on artificial intelligence (AI) initiatives led stocks to post their biggest one-day declines in nearly two years.

Mag 7 Stocks Retrace Some of Their Losses

Magnificent Seven shares are also recovering somewhat in premarket trading, with chip maker Nvidia (NVDA) rising about 3% despite reports its latest generation Blackwell chip will be delayed and that Chief Executive Officer (CEO) Jensen Huang offloaded more stocks in July.

The 10-year Treasury yield has now risen to 3.84% after falling to below 3.70% on hopes of an aggressive rate-rising path by the Federal Reserve. Monday’s rout had increased investors’ bets that the Fed may enact an emergency rate cut before its next meeting in September, although many analysts said that was unlikely.

“We expect the Federal Reserve to continue on its expected path, with a panic-driven response being unlikely,” Bjoern Jesch, Global Chief Investment Officer (CIO) of asset manager DWS, said in a note Tuesday. “A 50 basis points (bps) cut or an inter-meeting cut would signal a significant shift in policy, which we believe the Fed will try to avoid.”

Volatility Remains Elevated

Still, Wall Street’s “fear gauge,” the VIX index of implied stock market volatility, remains elevated, showing investors remain nervous after Monday’s dramatic declines.