Stocks end session up, bond yields reach pre-pandemic high

Technology companies and banks helped drive stocks higher Tuesday on Wall Street, as the market bounced back from an early slide to more than make up its losses from the day before.

The Standard & Poor’s 500 index rose 0.8% after having been down 0.4%. More than three-fourths of the stocks in the benchmark index notched gains. The Dow Jones industrial average rose 1.1% and the Nasdaq composite gained 1.3%.

Bond yields rose, lifting the 10-year Treasury yield to the highest level since before the pandemic began.

The indexes were all down in early trading but turned solidly higher around midmorning. That turnaround gained momentum after the S&P 500 crossed above 4,500 points, an important “resistance level,” something traders watch for when trying to guess the direction that a stock or index will move next.

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“Maybe today was more of a technical move as the market broke above that 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 set Jan. 3.

The Dow gained 371.65 points to 35,462.78, and the Nasdaq rose 178.79 points to 14,194.45.

Smaller-company stocks outpaced the broader market in 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 indexes. Rising inflation and the Fed’s plan to raise interest rates to fight it have been key concerns for investors. Any increase in rates would mark an abrupt turnaround from much of the last two years, when ultra-low rates helped prices surge for such things as stocks and cryptocurrencies.

“We’re in a bit of a holding pattern right now,” said Ross Mayfield, investment strategy analyst at Baird. “A lot of the near-term indigestion is priced in.”

The latest report on consumer prices from the Labor Department on Thursday will give Wall Street another update on just how much inflation is hitting consumers’ wallets. Economists expect a 7.3% rise in inflation in January, which would show that inflation remains at its highest levels in four decades. That could add to concerns over how often the Fed will raise rates 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.

“We could see the 10-year yield retrace some of its steps in the days ahead,” 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 kinds of loans, traded at 1.91% late Monday.

Banks, which benefit from higher interest rates and rising bond yields, made solid gains. Bank of America rose 1.8%. Raw materials companies, including steelmakers and paper producers, also gained ground.

Technology companies accounted for a big slice of the S&P 500′s rally. Apple rose 1.8%.

Chipmaker Nvidia rose 1.5% after shaking off an early loss following its announcement that it terminated its plan to buy chip designer Arm from Softbank.

Retailers and other companies that rely on direct consumer spending also helped lift the market. Amazon.com rose 2.2% and Home Depot gained 1.1%.

The price of U.S. crude oil fell 2.1% and weighed down energy stocks. Chevron fell 1.5%.

Peloton jumped 25.3% after announcing a corporate shake-up that included the resignation of its co-founder as chief executive and big job cuts.

Investors continued reviewing the latest corporate earnings with mixed reactions. Pfizer fell 2.8% after giving Wall Street a discouraging profit and revenue forecast. Harley-Davidson jumped 15.5% after reporting a surprising fourth-quarter profit.