U.S. stocks traded mostly higher Wednesday as investors focused on rebounding oil prices, a pause on rising benchmark Treasury yields and a brighter outlook for the economy.
Investors also monitored a second day of testimony from Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen on the health of the economy amid the coronavirus pandemic.
How are stock benchmarks performing?
The Dow Jones Industrial Average
rose 292 points, or 0.9%, to trade near 32,715.
The S&P 500 index
climbed 18 points to reach 3,928, a gain of 0.5%.
The Nasdaq Composite
was 83 points lower, or 0.6%, near 13,142, after a roller-coaster morning.
On Tuesday, the Dow fell 308.05 points, or 0.9%, to close at 32,423.15, to mark its worst daily loss since March 4, according to FactSet data. The S&P 500 declined 30.07 points, or 0.8%, finishing at 3,910.52, while the Nasdaq Composite Index fell 149.85 points, or 1.1%, to end at 13,227.70.
What’s driving the market?
U.S. stocks traded mostly higher at midday as oil prices rebounded from a sharp rout in the prior session and the climb in benchmark Treasury yields took a breather after recently reaching one-year highs.
“I think the overall market is being helped by the stabilization of interest rates and the rebound in oil and, frankly, by no surprises coming from Powell or Yellen,” Leo Grohowski, chief investment officer at BNY Mellon Wealth Management, told MarketWatch.
Federal Reserve Chair Powell and Treasury Secretary Yellen on Wednesday reiterated key points in front of the House from Tuesday’s testimony, namely that the economy should be poised for a strong rebound as more of the U.S. population gets vaccinated, but that the labor market’s return to health will take longer.
Investors remained concerned about Europe’s recent struggles with limiting the spread of coronavirus. Germany on Wednesday reversed plans for a stricter lockdowns over the Easter holiday, but worries remain about a potentially slower economic recovery for the region, even as fresh economic data have provided a bright spot.
Business activity in the eurozone unexpectedly grew in March, a preliminary survey showed. IHS Markit’s “flash” composite purchasing managers index, bounced to 52.5 this month, compared with 48.8 in February, rising above the 50 mark, which is seen as the dividing line between contraction and growth.
A flare up in the pandemic in the European Union is expected to compel the EU to draft emergency legislation that would allow it to control exports of COVID-19 vaccines, according to a report in the New York Times.
Back in the U.S., Grohowski said he still expects a more challenging period for financial markets this year because the region could be forced to “grapple with potentially too much of a good thing,” in terms of trillions worth of fiscal and monetary stimulus designed to aid the U.S. economy recover, which could also spark higher inflation and borrowing costs from recent lows.
“We have been warning investors that returns this year are likely going to be more of a challenge,” Grohowski said.
Even so, some equity bulls see a retreat in yields of benchmark U.S. Treasurys as paving a way for stocks to see fresh gains. Worries about the rise in yields have receded recently, with the 10-year Treasury note
at 1.63%, compared with 1.729% last Friday.
“I think under the hood at the Fed there’s more concern about inflation than they’re letting on, and I think the bond market is picking up on that,” said Donald Calcagni, chief investment officer with Mercer Advisors. “The bond market doesn’t need the Fed’s permission to raise rates, as we’ve seen.”
Calcagni thinks there’s a “tug-of-war” in the market between growth and value sectors. “We’re seeing rockiness now because we’re in the early stages of rotation,” he told MarketWatch. “Momentum takes time to shift and there’s friction as you rotate. Still, as the economy starts to open, value names should be the clear winners.”
In U.S. economic reports, durable-goods orders slid 1.1% in February, marking the first decline in 10 months. Economists surveyed by MarketWatch had forecast a 0.4% increase.
However, overall the U.S. economy grew faster in early March as the weather improved, governments loosened coronavirus restrictions and massive federal stimulus was injected into the economy, a new survey showed. Service-oriented businesses such as restaurants, resorts, airlines and hotels posted the steepest increase in business in almost three years, according to economic research firm IHS Markit. The firm’s “flash” service index climbed to an 80-month high of 60 from 59.8 in February.
Which stocks are in focus?
slumped 0.7%, after newly installed Chief Executive Pat Gelsinger laid out an ambitious road map to bounce back from manufacturing problems that surfaced last year.
Winnebago Industries Inc.
shares slipped 3.4% in late morning action Wednesday, after the company reported fiscal second-quarter profit and revenue that trounced expectations, and pointed to “strong retail momentum” heading into spring.
Shares of General Mills Inc.
lost 4.9% Wednesday after the food company reported fiscal third-quarter earnings that missed expectations.
GameStop Corp. stock
lost 18% after the videogame retailer at the center of the so-called meme-stock phenomenon said it had laid the groundwork for its “transformation,” but disappointed on its recent earnings.
Shares of Second Sight Medical Products Inc.
slid 14% after the implantable visual prosthetics company announced a large private placement of common stock.
Bank of New York Mellon Corp.
shares were 3.3% higher as a Bank of America analyst upgraded his view of the stock to a buy with a higher price target.
How are other assets trading?
The yield on the 10-year U.S. Treasury note
was fractionally lower at 1.63%, and has been down most days this week. Yields and bond prices move in opposite directions.
The ICE U.S. Dollar Index
a measure of the currency against a basket of six major rivals, was up 0.1%.
Oil futures gained, in part thanks to the cargo ship mishap in the Suez Canal, with the U.S. benchmark
up 6% to trade near $61.22 a barrel on the New York Mercantile Exchange.
Gold futures rose. The April contract
traded 0.6% higher, near $1,734.70 an ounce.
In Europe, the Stoxx 600 index
rose fractionally, while London’s FTSE 100
was up 0.2%.
In Asia, the Shanghai Composite
fell 1.3%, Hong Kong’s Hang Seng Index
tumbled 2% and Japan’s Nikkei 225