Stocks closed higher, extending last week’s gains

US stocks rose and government bond yields jumped, as investors shook off fears that rising inflation would drag the country’s economy into recession.

Tuesday’s moves have sent all three US indexes up at least 2.6% for the month so far, accordingly Last week’s gains. The Dow Jones Industrial Average rose 254.47 points, or 0.7%, to close at 3,4807.46. The S&P 500 rose 50.43, or 1.1%, to 4,511.61. The Nasdaq Composite closed at 14108.82, up 270.36 or 2.0%.

Nike advanced after the apparel maker announced its revenue That exceeded analysts’ expectations. Technology stocks also rose, as investors returned to the fast-growing companies whose shares were battered earlier this year.

“You’re starting to see a little bit of retaliation from growth stocks,” said Wayne Wilbanks, co-founder and chief investment officer at Wilbanks Smith & Thomas Asset Management LLC. “Prices have collapsed, so valuations have improved dramatically, to the point where it outweighs concerns about interest rates.”

Stock indexes closed lower on Monday after Federal Reserve Chairman Jerome Powell said the central bank was Willing to raise interest rates In steps of half a percentage point if necessary to curb inflation. But by Tuesday morning, investors were interpreting Powell’s comments as a vote of confidence in the outlook for the economy.

“The message that came out of [Fed] Last week’s meeting is that they will stress [monetary policy] “But the US economy is resilient enough to handle that,” said Howe Roberts, head of analytics at Quant Insight, a data analytics company. “The stock market chose to emphasize the economic resilience part.”

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Tuesday saw gains from shares of banks and other financial firms that are poised to benefit from higher long-term interest rates. The price of oil rose, then fell, and then reversed two more times.

The sell-off in government bonds intensified, sending the yield on 10-year US Treasuries to 2.375% from 2.315% on Monday. The yield on the benchmark paper is now near its highest level since May 2019, before the Covid-19 pandemic turned financial markets on its head. Yields rise when bond prices fall.

In energy markets, Brent crude futures, the international benchmark, fell 0.1% to $115.48 a barrel. Last week, Brent crude prices fell below $100 before reversing. Support for an EU-wide ban on the purchase of Russian oil It grows inside the block, which increases the possibility of continued fluctuations.

“Given today’s market leadership, it’s a mixed bag,” said John Lynch, chief investment officer at Comerica Wealth Management. The stock market appears to be tamed, but the bond market does not.

Stocks, bonds, commodities and currencies have been hit hard by volatility over the past month as investors tried to assess the economic fallout from Russia’s war in Ukraine. For the 39th time this year, the Nasdaq-heavy composite index closed Tuesday with a movement of 1% or more, marking its most volatile quarter since the first three months of 2009.

Many investors fear that the war could be maintain inflation And hinder economic growth in the United States and Europe.

This week, though, investors threw in a new curve ball when Powell, speaking on Monday, hit a tougher tone than he used when Raising interest rates from nearly zero last week. Emphasizing the uncertainty facing the central bank, he said the Fed would switch to a more restrictive stance if necessary.

Traders worked on the floor of the New York Stock Exchange on Monday.


Photo:

Brendan McDermid/Reuters

These comments have prompted some analysts and investors to reassess interest rate expectations. Goldman Sachs economists said in a note after Powell’s comments that they now expect increases of half a percentage point at the Fed’s May and June meetings. That compares with expectations of quarter-percentage point increases in both previous meetings.

Monday’s comments added to investor concerns that the Federal Reserve may tighten more quickly at a time when the economy is slowing. “The big variable now is the economic growth side of things,” said Mr. Roberts.

Many investors keep a close eye on the so-called yield curve, which measures the difference between short- and long-term interest rates, and is often seen as a strong indicator of sentiment about economic growth prospects. Recently, the gap between the yields on short-term and long-term US Treasury bonds shrinksparking fears that the bond market is close to signaling a possible recession.

The two-year Treasury yield – which is particularly sensitive to changes in monetary policy – rose to 2.152% on Tuesday from 2.132% on Monday.

Bank shares rose. Financial stocks helped lead the S&P 500’s gains, with the sector gaining about 1.6%. Wells Fargo jumped $2.25, or 4.4%, to $53.39, while Signature Bank rose $10.30, or 3.3%, to $321.18.

Nike shares rose $2.90, or 2.2 percent, to close at $133.09.

“Nike is the ultimate global company, selling and exporting all over the world,” Jack Applin, chief investment officer at Cresset Capital. “It’s a great metric, and they have eased a lot of investor concerns.”

The inversion of the US Treasury yield curve has been seen as a warning sign of a recession for decades, and it looks like it is about to light up again. WSJ’s Dion Rabouin explains why an inverted yield curve can be so reliable in predicting a recession and why market watchers are talking about it now. Illustration: Ryan Trevis

Telecom and technology shares also rose. Etsy stock rose $5.98, or 4.2%, to $148.25, while Match Group jumped $4.28, or 4.3%, to $104.31. Amazon.com is up for the sixth consecutive day, according to Dow Jones Market data. The stock closed at $3,297.78, up $67.95, or 2.1%.

Okta fell $2.98, or 1.8%, to $166.43 after a hacking group posted screenshots claiming to have gained access to official Okta.com and other systems. The company said Tuesday that A preliminary investigation found no evidence of any malicious activity, adding that the screenshots were likely related to a security incident that occurred in January.

Bitcoin It rose about 3.5% from the 5 pm ET level on Monday to trade around $42,611. The price of the cryptocurrency has fluctuated sharply over the past month, but it has been trading pretty much above $40K since the middle of last week.

In Europe, the Stoxx Europe 600 continental index rose 0.9%, rising for the fifth consecutive session.

In Asia, Hong Kong’s Hang Seng is up 3.2%, while Japan’s Nikkei 225 is up 1.5%. China Shanghai Composite advanced 0.2%.

Write to Justin Baer at justin.baer@wsj.com and Caitlin McCabe at caitlin.mccabe@wsj.com

Corrections and amplifications
The Nasdaq Composite Index rose 270.36 points Tuesday, while Wells Fargo stock closed at $53.39. An earlier version of this article incorrectly stated that the Nasdaq rose 20.36 points and Wells Fargo shares closed at $52.39. (corrected March 22nd).

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