Stocks close higher and bond yields reach prepandemic highs

Wall Street saw stocks rise Tuesday thanks to Wall Street banks and technology companies. The market rebounded from an earlier slide and more than made up for its losses the previous day.

After being down 0.4%, the S&P 500 saw a 0.8% increase. The benchmark index saw gains in more than three quarters of the stocks. The Dow Jones Industrial Average increased 1.1%, while the Nasdaq composite rose 1.3%.

The 10-year Treasury yield rose to its highest level since the start of the pandemic. Bond yields also rose.

The indexes fell in the early hours of trading, but rose steadily by mid-morning. The S&P 500 crossed over 4,500 points, a critical “resistance” level that traders use to predict the direction of a stock or index’s next move.

“Maybe today was more technical as the market broke above this important resistance level,” stated Sam Stovall (chief investment strategist at CFRA).

The S&P 500 climbed 37.67 points, to 4,521.54. The index is now 5.7% lower than the Jan. 3 record.

The Dow gained 371.65 to 35,462.78, while the Nasdaq gained 178.79 to 14,194.45.

Investors may be optimistic about economic growth if they choose to hold smaller company stocks than the larger market. The Russell 2000 rose by 32.77 points or 1.6% to 2,045.37.

This week’s muted trading follows weeks of volatility in major indexes. Investors have expressed concern about rising inflation and the Fed’s plan for raising interest rates to combat it. A rate increase would be a sudden change from the past two years, which saw prices rise for everything from stocks and cryptocurrencies to ultra-low rates.

Ross Mayfield, Baird’s investment strategy analyst, said that “We are in a bit more of a holding pattern right currently.” “A lot of near-term indigestion has been priced in.”

Wall Street will get an update from the Labor Department Thursday on how much inflation is affecting consumers’ wallets. Economists predict a 7.3% increase in inflation in January. This would indicate that inflation is at its highest level in 40 years. This could raise concerns about how frequently the Fed will raise rates in this year.

Tuesday’s afternoon market rebound could suggest investors are assuming that the consumer price index report will show a smaller-than-expected increase, Stovall said.

He said that the 10-year yield could retrace some its steps in the days to come.

The 10-year Treasury note yield rose to 1.96%. This is the highest level since the pandemic. Late Monday’s trading price of the yield, which is used for setting interest rates on mortgages, and other types of loans, was 1.91%.

The rising interest rates and higher bond yields have benefited banks, which made solid gains. Bank of America rose 1.8%. Companies that produce raw materials, such as steelmakers or paper producers, also saw a rise in sales.

A large portion of the rally in S&P 500 was attributed to technology companies. Apple rose 1.8%.

After announcing that it had ended its plans to purchase chip designer Arm from Softbank, Chipmaker Nvidia gained 1.5%

The market was also lifted by retailers and other companies that depend on direct consumer spending. Amazon.com grew 2.2%, while Home Depot gained 1.1%.

The U.S. crude oil price fell 2.1%, which weighed on energy stocks. Chevron fell 1.5%.

Peloton surged 25.3% following the announcement of a corporate shakeup, which included the resignation and massive job cuts.

Investors continued to review the latest corporate earnings, with mixed reactions. Pfizer dropped 2.8% after Wall Street gave a disappointing profit and revenue forecast. After reporting an unexpected fourth-quarter profit, Harley-Davidson saw a 15.5% jump.