Börsenpares wins on Tuesday’s course

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WSJ.com: Markets

The S&P 500 rose on Wednesday, making up some of its losses from the previous day’s defeat when traders stole discounted stocks.

The major indices fluctuated during a troubled trading session as bond yields appeared to stabilize before resuming their uptrend.

The S&P 500 was up 6.83 points, or 0.2%, to 4,359.46 after falling 2% on Tuesday in its worst one-day performance since May. The Dow Jones Industrial Average rose 90.73 points, or 0.3%, to 34,390.72. The technology-heavy Nasdaq Composite meanwhile lost 34.24 points or 0.2% to 14512.44.

Closely watched bond yields continued to rise. The benchmark 10-year US Treasury bond yield rose for the seventh straight trading day, climbing to 1.540% on Wednesday – its highest closing price since June – from 1.534% on Tuesday.

The stock market skyrocketed in 2021, so even after the most recent volatility, the S&P 500 is up 16% for the year. An important reason: when worries about the spread of Covid-19, the surprising rise in inflation or possible setbacks in monetary policy incentives threatened to derail the rally, investors jumped in.

“At some point, buying the dip won’t work and we will have a fix,” said Hank Smith, Haverford Trust’s head of investment strategy. “Our view has been pretty consistent and we’re not changing that this will be a buyable drop.”

Stocks have had a rough patch in the last few days after the Federal Reserve signaled that it would cut its bond purchases as early as November – and possibly start raising rates next year. Higher prices for oil and other commodities also helped push bond yields higher as investors prepared for higher inflation.

Higher returns have hit the stocks of fast-growing technology companies that are heavily weighted in major stock indices. These stocks are particularly sensitive to changes in bond yields because much of the value investors attribute to them is based on distant future earnings. When yields rise, bonds become more attractive compared to stocks.

Tech stocks showed mixed results on Wednesday. Apple shares rose 92 cents, or 0.6%, to $ 142.83, while Alphabet-Class A shares fell $ 29.53, or 1.1%, to $ 2,687.07.

Most sectors of the S&P 500 rose, led by the utilities group, which posted a 14-session losing streak, up 1.3% for the day. The consumer staples, healthcare and real estate sectors also helped pull the market higher.

Investors say the abrupt moves of the past few days should be viewed in the context of the longer-term gains in the market.

“We’re swaying,” said Linda Duessel, senior equity strategist at Federated Hermes. “That’s okay. We’ve had such a great run so far this year.”

The global Brent crude oil benchmark fell 0.6% on Wednesday to $ 78.64 a barrel, the third highest settlement value this year. An unexpected drop in US consumer confidence and unexpectedly high inventory levels suggested by analysts that energy demand could weaken in the short term.

“Ultimately, the huge rise in oil prices in the last few days has led to this huge leap in yields that has a massive impact on inflation,” said Fahad Kamal, chief investment officer at Kleinwort Hambros. “The fact that oil has stopped rising means that yields can stop rising too. The pressure to sell has subsided. “

On a stock-by-stock basis, Dollar Tree’s shares rose $ 14.23, or 16%, to $ 100.51 after the discounter announced it added approximately $ 1 billion to its share buyback plan. The company also announced that some of its stores will sell products at prices a little over $ 1.

The glasses manufacturer’s sales are divided equally between the stationary branches and the online shop.

Eyewear maker Warby Parker was directly listed on the New York Stock Exchange on Wednesday. The stock closed at $ 54.49.

The surge in government bond yields is attracting capital flows and propelling the dollar higher, said Georgina Taylor, multi-asset fund manager at Invesco. Earlier this week, during the sell-off, it was more of a defensive game and “you have the return argument, too,” she said.

Stocks went through a rough patch recently after the Federal Reserve signaled that it would soon begin scaling back bond purchases.


Photo:

Richard Drew / Associated Press

—Quentin Webb contributed to this article.

Write to Frances Yoon at frances.yoon@wsj.com, Anna Hirtenstein at anna.hirtenstein@wsj.com and Karen Langley at karen.langley@wsj.com

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