Why the Dow finally bounced — and what it will take to prove it’s for real


A little pre-summer cheer finally filtered its way into the stock market the week before Memorial Day, but it will likely take more than the Dow Jones Industrial Average’s first winning week since late March to convince rattled investors that the pain is in the past.

What happened? Real, or inflation-adjusted, interest rates fell over the past week, corporate credit spreads — the yield premium over U.S. Treasurys demanded by investors to buy bonds issued by companies — tightened, and investor expectations for future Federal Reserve rate increases moderated, noted Mahmood Noorani, chief executive of research firm Quant Insight, in an interview (see chart below).

Quant Insight

Read more…