By COMFORT OGBONNA
U.S. stocks rebounded on Wednesday after a technology-led selloff in the previous session, with easing Treasury yields helping restore investor appetite for risk as markets assessed a series of corporate earnings and business updates.
The three major stock indexes opened higher, with gains across health care and several other sectors helping offset continued weakness in parts of the technology and semiconductor industries.
The Dow Jones Industrial Average rose 119.94 points, or 0.22%, to 53,463.34 at 9:36 a.m. ET. The S&P 500 gained 28.48 points, or 0.37%, to 7,720.24, while the Nasdaq Composite advanced 67.17 points, or 0.26%, to 26,356.89.
The recovery followed a difficult session for technology stocks on Tuesday, when rising government bond yields put pressure on companies whose valuations depend heavily on expectations for future earnings.
The yield on the 30-year U.S. Treasury bond eased on Wednesday after reaching its highest level since 2007 in the previous session. The yield was last at 5.209%, helping reduce some of the pressure on equity markets.
The decline in long-term yields followed the Treasury Department’s decision to increase the size of certain liquidity-support buyback operations for longer-dated government bonds. The move boosted investor sentiment and contributed to a broader recovery in risk appetite.
Higher interest rates can weigh particularly heavily on technology and growth stocks because investors place a greater value on their expected future earnings. When bond yields rise, those future profits become less attractive relative to investments offering higher returns in the bond market.
Health care stocks were among the strongest performers on Wednesday after Moderna shares more than doubled following positive results from a late-stage trial of its personalized cancer vaccine developed with Merck.
The treatment reduced the risk of melanoma recurrence and helped drive a broad rally across biotechnology and pharmaceutical companies.
Merck shares rose 9.6%, providing a significant boost to the Dow. Novavax gained 6.8%, while U.S.-listed shares of BioNTech climbed 17.5%.
The S&P 500 health care sector rose 2.7% to a record high, making it the best-performing sector in the broader index.
Technology stocks, meanwhile, remained mixed.
Marvell Technology jumped about 9% after the chipmaker granted Alphabet’s Google a warrant to purchase a stake valued at approximately $12.18 billion as part of a custom-chip agreement.
Broadcom shares fell more than 4%, however, limiting gains in the semiconductor sector. The Philadelphia Semiconductor Index was down 0.7%, while the S&P 500 technology sector slipped 0.4%.
The technology sector has faced renewed pressure as investors question whether the enormous amount of spending on artificial intelligence infrastructure will generate sufficient financial returns in the near term.
Strong corporate earnings and large investments in artificial intelligence helped drive the S&P 500 and Dow to record levels earlier this month. However, concerns about the cost of AI development and the time required for those investments to produce meaningful profits have remained a source of uncertainty.
Investors are also closely watching the Federal Reserve’s interest-rate outlook. Market pricing indicates that traders expect at least one 25-basis-point rate increase by the end of 2026, although expectations for a rate hike as early as September have declined significantly following weaker-than-expected inflation data last week.
The outlook for interest rates remains important for stock valuations. Any indication that borrowing costs could remain elevated for longer could put renewed pressure on high-growth companies, while signs of easing financial conditions could provide additional support for equities.
Wednesday’s rebound also reflected a broader improvement in market breadth. Advancing stocks outnumbered declining stocks by nearly 4 to 1 on the New York Stock Exchange and by more than 2 to 1 on the Nasdaq.
The S&P 500 recorded eight new 52-week highs and no new lows, while the Nasdaq recorded 60 new highs and 29 new lows.
Investors are now balancing several competing forces, including interest-rate expectations, corporate earnings, artificial intelligence spending, government borrowing and geopolitical risks.
While the retreat in Treasury yields provided relief to stocks on Wednesday, markets remain sensitive to further moves in bond yields. A renewed rise in long-term rates could once again put pressure on technology companies and other growth-oriented shares.
For now, the combination of lower bond yields and strong gains in health care stocks has helped Wall Street recover some of the ground lost during Tuesday’s technology-led decline.
Original article
Comments