US Stocks Extend Last Week’s Gains

US stocks rose and government-bond yields jumped Tuesday, as investors shook off concerns that rising inflation will drag the nation’s economy into a recession.

Tuesday’s moves had all three US indexes up at least 2% for the month so far, building on last week’s gains. The Dow Jones Industrial Average rose 238 points, or 0.7%, in early afternoon trading. The S&P 500 climbed about 1% and the Nasdaq Composite added 1.7%.

The Nasdaq led Wall Street’s main indexes higher on Tuesday as investors bought the dip in technology stocks, while briefly taking in their stride a more aggressive tone by the Federal Reserve to raise the cost of borrowing to tame inflation.

Bank shares, meanwhile, rose tracking a rise in the benchmark 10-year Treasury yield to 2.36%. The S&P 500 banks index (.SPXBK) gained 2.6%, powered by a 4.6% rise in Wells Fargo (WFC.N).
Rising interest rates could also help boost profitability of banks, which took a hit after the Fed cut the rates to record low in the wake of COVID-19 pandemic.

Right now, the market is not concerned about higher rates. Rather, the market is looking at the silver lining saying we need higher rates to tackle the inflation problem and is applauding the Fed’s hawkish stance which is shocking. However, expectations of rapid interest rate hikes have also led to a flattening in the yield curve amid a selloff in US Treasuries, stoking fears of slowing economic growth.

The odds of a 50-basis point rate hike in May rose to 72.2% after Chair Jerome Powell said the central bank must move “expeditiously” to keep an upward price spiral from getting entrenched. Despite the hawkish Fed stance, eight of the 11 major S&P sectors were up with communication services (.SPLRCL) up 2.4% followed by financials (.SPSY) and information technology (.SPLRCT) shares.

Money managers are concerned that the bottom is in. This market now is kind of just focused on getting capital put back in the market and dips are getting bought. Megacap Apple Inc (AAPL.O), Microsoft Corp (MSFT.O), Amazon.com (AMZN.O), Meta Platforms (FB.O) and Alphabet Inc (GOOGL.O) gained between 1.7% and 3.2% to provide the biggest boost to the S&P 500 and the Nasdaq.

A 12% jump in Alibaba Group Holding also spurred a rally in Chinese tech stocks after the e-commerce giant raised its share buyback program to a record $25 billion.

Meanwhile, the Kremlin said it would like ongoing talks between Moscow and Kyiv to be more “active and substantive”, as fighting between Russian and Ukrainian forces continued. Rising uncertainty around the conflict and hawkish comments from Powell had led Wall Street’s main indexes to snap four sessions of gains on Monday.

At 11:46 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 204.60 points, or 0.59%, at 34,757.59, the S&P 500 (.SPX) was up 43.98 points, or 0.99%, at 4,505.16, and the Nasdaq Composite (.IXIC) was up 256.92 points, or 1.86%, at 14,095.38.

Tesla Inc (TSLA.O) added 2.4% as the electric-car maker delivered its first German-made cars to customers at its Gruenheide gigafactory.
Nike (NKE.N) shares advanced 4.6% as it beat quarterly profit and revenue expectations, and said manufacturing issues pinching sales over the past six months were now behind it.

Advancing issues outnumbered decliners by a 1.45-to-1 ratio on the NYSE and by a 2.47-to-1 ratio on the Nasdaq. The S&P index recorded 35 new 52-week highs and no new lows, while the Nasdaq recorded 46 new highs and 28 new lows.