NEW YORK (AP) — Stocks rebounded on Wall Street for their first gain in more than a week as some calm returned to markets around the world on Wednesday after the Bank of England acted forcefully to master an emerging financial crisis.
The S&P 500 jumped 2% on its best day in seven weeks to snap its longest losing streak since the coronavirus crash in February 2020. Along with relief on Wall Street, bond markets around the world also eased and European stocks erased morning losses after the UK central bank said it would, however, buy many of the UK government bonds needed to restore order to its financial markets.
Falling bond yields eased some of the pressure that had been stifling Wall Street this year, and the Dow Jones Industrial Average rebounded 1.9%. The Nasdaq composite climbed 2.1% and the smaller stocks that make up the Russell 2000 Index climbed even more, 3.2%.
These measures have helped markets recoup recent losses triggered by the turmoil in UK financial markets. After the government announced a sweeping round of tax cuts, investors feared attempts to goose the UK economy could push already high inflation even further. This sent the value of the pound plunging and bond yields higher globally.
Despite Wednesday’s rally, the US stock market is still down more than 20% from its record high set earlier this year and remains near its lowest point since the end of 2020. Analysts say more Turbulence is likely as worries about a possible recession, higher interest rates and even higher inflation continue to weigh on Wall Street.
Underscoring these concerns, the 10-year US Treasury yield briefly rose above 4% on Wednesday morning to touch its highest level in more than a decade. It has seen a rapid rise along with other Treasury yields as the Federal Reserve raises short-term interest rates at the fastest rate in decades.
By raising rates, the Fed hopes to slow the economy enough to bring down the high inflation that is hammering the economy. But it risks creating a recession if it raises rates too quickly. Already, the housing industry has been hit particularly hard, with mortgage rates hitting their highest levels since 2008.
A recession seems inevitable, according to Liz Ann Sonders, chief investment strategist at Charles Schwab. It points to several discouraging signals, including six consecutive months of contraction for an index of the main economic indicators. That hadn’t happened since the start of the global financial crisis two recessions ago.
Investment giant Vanguard puts the probability of a recession in the United States at 25% this year and 65% next year, given forecasts that the Fed will continue to raise rates and will probably keep them at high levels until 2023.
Along with concerns about rate hikes from the Fed and other central banks, a litany of other market pressures lurk as well.
Among them: Investors fear that the stress caused by a huge run in the value of the US dollar against other currencies could crack something somewhere in global markets. In Europe, tensions are rising even higher amid Russia’s invasion of Ukraine, with suspicions of sabotage of major gas pipelines being the latest flashpoint. And US corporate earnings are at risk due to the slowing economy, high inflation and a rising dollar.
For Wednesday at least, however, the market seemed to be focused more on relief than on such worries.
“Investors got the feeling that maybe the central banks blinked, or at least the central bank of England blinked. This led to lower rates” for longer-term US bonds, said Jack Ablin, chief investment officer at Cresset. “And that helped push the stock up.”
Following the Bank of England’s bond purchase announcement, the 10-year US Treasury yield fell sharply to 3.73% from 3.95% on Tuesday night. In the UK, the 10-year yield fell about half a percentage point to just above 4%
On Wall Street, a broad-based rally saw nearly 35 stocks rise in the S&P 500 index for each one that fell. Healthcare stocks led the way following an encouraging update on a potential treatment for Alzheimer’s disease.
Japan’s Eisai said his potential treatment appeared to slow the deadly disease in a late-stage study. Shares of Biogen, which will co-promote the drug, soared 39.9%.
Shares of energy producers were also strong after crude oil prices recovered some of their recent steep losses caused by recession worries.
The S&P 500 rose 71.75 points to close at 3,719.04. The Dow gained 548.75 to 29,683.74 and the Nasdaq climbed 222.13 to 11,051.64.
Wall Street’s rise came despite a 1.3% decline for Apple, which is the most influential stock in the S&P 500 because it is the largest. He was hurt by a report from Bloomberg that said weak demand for the latest iPhone model is causing Apple to scrap plans to increase production.
Earlier in the morning, ahead of the Bank of England’s announcement, stocks across Asia fell. Hong Kong’s Hang Seng lost 3.4%, South Korea’s Kospi fell 2.5% and Japan’s Nikkei 225 fell 1.5%. The Chinese yuan also fell to its lowest level in 14 years against the dollar despite efforts by the central bank to stem the slide. .
—-
AP Business Writers Matt Ott and Elaine Kurtenbach contributed to this report.
Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.
