Tech companies led a rally for stocks on Wall Street on Tuesday as the market more than offset a modest pullback earlier in the week.
The S&P 500 rose 1.1% as more than 70% of stocks in the benchmark index gained. The Dow Jones Industrial Average rose 0.7% and the tech-heavy Nasdaq composite climbed 2%.
Bond yields rose sharply for the second day in a row, reflecting expectations of more aggressive interest rate hikes from the Federal Reserve as the central bank moves to stifle the highest inflation in decades . The 10-year Treasury yield climbed to 2.38% from 2.30% late Monday. The yield, which influences interest rates on mortgages and other consumer loans, was 2.14% Friday night.
The rise in bond yields and stocks comes a day after Federal Reserve Chairman Jerome Powell said the central bank was ready to act more aggressively to raise interest rates in its fight against inflation, if necessary. Powell said the Fed would raise its benchmark short-term interest rate by half a point at multiple Fed meetings if needed.
“Perhaps investors feel that with a more proactive approach from the Fed, it won’t have to put the brakes on later,” said Sam Stovall, chief investment strategist at CFRA.
The S&P 500 rose 50.43 points to 4,511.61 and the Dow gained 254.47 points to 34,807.46. The Nasdaq gained 270.36 points to 14,108.82.
Small company stocks also rebounded. The Russell 2000 Index added 22.41 points, or 1.1%, to 2,088.34.
Worries about rising inflation and slowing economic growth have weighed on stocks so far in 2022, but a rally last week helped pare some of the S&P 500’s benchmark losses for the year. . The index is now down 5.3%.
Markets have been choppy as Wall Street adjusts to slowing economic growth now that federal spending on various stimulus measures has faded.
“It’s actually pretty normal, but it doesn’t seem normal because the last few years have been really strong,” said Matt Stucky, senior portfolio manager at Northwestern Mutual Wealth.
Last Wednesday, the central bank announced a quarter-point rate hike, its first interest rate hike since 2018. The Fed has not raised its key rate by half a point since May 2000.
“What has been a frustrating inflation setup for the Federal Reserve likely becomes more complex given the geopolitical dispute,” Stucky said.
Investors’ concerns about the persistent rise in inflation were heightened by Russia’s War in Ukraine. Energy and commodity prices were already high as demand outstripped supply amid the global economic recovery, but the conflict pushed prices for oil, wheat and others even higher.
Rising raw material costs and shipping issues have made it more expensive for businesses to operate. Many of these costs have been passed on to consumers, and rising prices for food, clothing and other goods could lead to lower spending and slower economic growth.
Technology and communications stocks generated much of the S&P 500’s gains on Tuesday, as did companies that rely on consumer spending. Apple rose 2.1% and Twitter gained 2.6%. Nike added 2.2% after reporting surprisingly strong third-quarter financial results. Energy stocks fell as oil prices fell.
Banks helped drive the market higher as bond yields continued to rise. Higher bond yields allow banks to charge more lucrative interest on loans. Bank of America gained 3.1% and JPMorgan Chase gained 2.1%.
The price of benchmark U.S. crude oil fell 0.3% to $111.76 a barrel, while Brent, the international standard, slipped 0.1% to 115, $48 a barrel. European markets rose overall, while Asian markets closed higher overnight.
Investors will soon begin to prepare for the next round of corporate earnings reports as the current quarter draws to a close at the end of March, which could provide a clearer picture of how industries continue to manage the rise. costs.