Stock market parries gains after Tuesday rout

US stocks rose on Wednesday, recouping some of their losses from the previous day’s rout as traders recovered lower priced stocks.

The S&P 500 rose 0.2% as the market closed at 4 p.m. in New York City, regaining some of the ground lost on Tuesday when the benchmark stock index fell 2% in its worst performance on a day since May. The Dow Jones Industrial Average advanced 0.3%, while the Nasdaq Composite lost 0.2%.

Bond yields continued to rise. The yield on the benchmark 10-year US Treasury bond rose for a seventh consecutive trading day, soaring to 1.540% on Wednesday – its highest close since June – from 1.534% on Tuesday.

The stock market has skyrocketed in 2021 and is up 17% for the year, even after recent volatility. One big reason: When concerns about the spread of Covid-19, the surprising rise in inflation, or potential setbacks in monetary stimulus threatened to derail the rally, investors stepped in to buy.

“At some point buying down won’t work and we’re going to have a correction,” said Hank Smith, head of investment strategy at Haverford Trust. “Our point of view has been pretty consistent, and we’re not changing it, that it will be a buyable drop.”

Stocks have had a rough time in recent days after the Federal Reserve signaled it would start cutting bond purchases as early as November and possibly start raising interest rates next year. Rising prices for oil and other commodities also helped push up bond yields as investors braced for higher inflation.

The higher returns hit stocks of fast-growing technology companies, which weigh heavily in major stock indexes. These stocks are particularly sensitive to changes in bond yields, as much of the value investors place on them is based on distant future earnings. When yields rise, bonds become more attractive to hold relative to stocks.

Tech stocks had a mixed performance on Wednesday, with Apple stocks adding 1.3% while Alphabet Class A stocks were down 0.7%.

Gains in the stock market were widespread. All but one of the 11 sectors of the S&P 500 were up in the afternoon trading.

Investors say the sharp moves of the past few days need to be seen against the backdrop of longer-term market gains.

“We are faltering,” said Linda Duessel, senior equity strategist at Federated Hermes. “It’s great. We’ve had such a great race this year so far.

Global benchmark Brent crude oil fell 0.6% to $ 78.64 per barrel on Wednesday, after hitting a three-year intraday high on Tuesday. An unexpected drop in US consumer confidence and higher than expected inventories suggest near-term energy demand could weaken, analysts said.

“Ultimately what caused this big increase in yields was this huge increase in oil prices over the last few days, it has a huge impact on inflation,” said Fahad Kamal, chief investment officer at Kleinwort Hambros. “The fact that oil has stopped rising means that yields may also stop rising. The selling pressure has diminished.

Among individual stocks, Dollar Tree shares jumped 16% after the discount retailer said it added about $ 1 billion to its share buyback plan. The company also said it will start selling products for prices just over $ 1 in some of its stores.

The eyewear’s sales are split roughly evenly between its physical locations and its online store.

Shares of eyewear maker Warby Parker began trading on the New York Stock Exchange on Wednesday.

The US dollar rose again, with the WSJ Dollar Index hitting its highest level since November.

Rising government bond yields are attracting capital inflows, pushing the dollar higher, said Georgina Taylor, multi-asset fund manager at Invesco. Earlier in the week when the market closed, it was more of a defensive game and “you also have the yield argument forming,” she said.

Stocks have had a rough time recently after the Federal Reserve signaled it would start cutting bond purchases soon.


Photo:

Richard Drew / Associated press

—Quentin Webb contributed to this article.

Write to Frances Yoon at [email protected], Anna Hirtenstein at [email protected] and Karen Langley at [email protected]

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