Stocks gain ground, bond yields hit pre-pandemic highs
Stocks rose in the afternoon on Wall Street on Tuesday after a directionless morning as investors continue to struggle to predict how well the economy will hold up to the current bout of inflation as well as the medicine of the Reserve federal government to cure it, higher interest rates.
The S&P 500 was up 0.8% at 2:08 p.m. ET. The Dow Jones Industrial Average rose 368 points, or 1.1%, to 35,457 and the Nasdaq rose 1.1%.
Shares of small companies have outperformed the broader market, a potential sign that investors are optimistic about economic growth. The Russell 2000 rose 1.3%.
Bond yields rose. The yield on the 10-year Treasury note rose to 1.95%, its highest level since before the start of the pandemic. The yield, which is used to set interest rates on mortgages and many other types of loans, traded at 1.91% late Monday.
Banks, which benefit from rising interest rates and rising bond yields, made solid gains. Bank of America rose 1.9%. Commodity companies, including steel and paper makers, also gained ground.
Technology companies have largely advanced and helped boost the overall market. Apple rose 1.8%.
Chipmaker Nvidia rose 0.5% after suffering an early loss following news that it had ended its plan to buy chip designer Arm from Softbank.
The price of US crude oil fell 1.5% and weighed on energy stocks. Chevron fell 1.5%.
Peloton jumped 26.9% after announcing a company shakeup that included the resignation of its co-founder as CEO and major job cuts.
Investors continued to scrutinize the latest corporate results with mixed reactions. Pfizer fell 3.5% after giving Wall Street disheartening earnings and revenue forecasts. Harley-Davidson jumped 15% after reporting a surprising fourth-quarter profit.
The mostly muted trading so far this week follows weeks of volatility for major indices. Rising inflation and the Fed’s plan to raise interest rates to combat it were the primary concerns for investors. Any rate hike would mark a sharp turnaround from much of the past two years, when ultra-low rates drove up prices for everything from stocks to cryptocurrencies.
“We’re in a bit of a holdover situation right now,” said Ross Mayfield, investment strategy analyst at Baird. “A lot of short-term indigestion is taken care of.”
The Labor Department’s latest consumer price report released Thursday will give Wall Street another update on the depth of inflation hitting consumers’ wallets. Economists expect inflation to rise 7.3% in January, which would show that inflation remains at its highest level in four decades. This could add to concerns about how often the Fed will raise rates this year.