By DAMIAN J. TROIS and ALEX VEIGA
Tech companies and banks helped lift stocks on Wall Street on Tuesday as the market rebounded from an early plunge to more than offset its losses the day before.
The S&P 500 rose 0.8% after falling 0.4%. More than three-quarters of stocks in the benchmark index posted gains. The Dow Jones Industrial Average rose 1.1% and the Nasdaq composite gained 1.3%.
Bond yields rose, taking the 10-year Treasury yield to the highest level since before the pandemic began.
The indices were all down at the start of the session, but turned significantly higher around mid-morning. This reversal gained momentum after the S&P 500 broke through 4,500 points, an important “resistance level” that traders watch for when trying to guess the direction in which a stock or index is heading. will then move.
“Maybe today was more of a technical decision as the market broke through this important resistance level,” said Sam Stovall, chief investment strategist at CFRA.
The S&P 500 rose 37.67 points to 4,521.54. The index is now about 5.7% below the all-time high it hit on Jan. 3.
The Dow gained 371.65 points to 35,462.78 and the Nasdaq rose 178.79 points to 14,194.45.
Shares of small companies have outperformed the broader market, a potential sign that investors are optimistic about economic growth. The Russell 2000 rose 32.77 points, or 1.6%, to 2,045.37.
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.
Tuesday afternoon’s market rebound could suggest investors are assuming the consumer price index report will show a smaller increase than expected, Stovall said.
“We could see the 10-year yield retrace some of its milestones in the coming days,” he said.
The yield on the 10-year Treasury note rose to 1.96%, its highest level since before 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 1.8%. Commodity companies, including steel and paper makers, also gained ground.
Tech companies were a big part of the S&P 500 rally. Apple rose 1.8%.
Chipmaker Nvidia rose 1.5% after suffering an early loss following news that it was ending its plan to buy chip designer Arm from Softbank.
Retailers and other businesses that rely on direct consumer spending have also helped boost the market. Amazon.com rose 2.2% and Home Depot 1.1%.
The price of US crude oil fell 2.1% and weighed on energy stocks. Chevron fell 1.5%.
Peloton jumped 25.3% 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 2.8% after giving Wall Street disheartening earnings and revenue forecasts. Harley-Davidson jumped 15.5% after reporting a surprising fourth-quarter profit.