Monday’s rally came despite an overnight drop in Asian markets and a big decline in bitcoin. Japan's Nikkei 225 fell more than 3% on Monday, with automakers Nissan and Honda leading the way. Meanwhile, bitcoin slipped below $33,000 as China continued its crackdown on cryptocurrency mining.
Stocks suffered sharp losses last week after the Fed signaled it will tighten monetary policy at a faster-than-expected pace. The central bankers also expressed heightened concerns about inflation risks. Shares tied to economic growth led the sell-off, while the bond market responded with a drastic flattening of the Treasury yield curve in which long-term bond yields fell and short-term ones rose.
"The Fed-inspired sell-off looks like it was overdone," said Fiona Cincotta, senior financial markets analyst at City Index. "The Fed's sudden hawkish shift last week, with two interest rate hikes now expected in 2023 caught the market off guard."
