By DAMIAN J. TROIS and ALEX VEIGA
NEW YORK (AP) — A late afternoon reversal led by tech stocks left major indexes slightly higher on Wall Street on Monday, averting more losses for the market after a brutal April in which massive selling technologies drove the major benchmarks.
The S&P 500 rose 0.6% after falling 1.7% earlier in the day. The Dow Jones Industrial Average rose 0.3% and the tech-heavy Nasdaq gained 1.6%.
Bond prices fell, pushing yields higher. The 10-year Treasury yield briefly hit its highest level since late 2018.
The uneven start to May follows an 8.8% slippage for the benchmark S&P 500 in April, led by Big Tech companies, which have started to look overvalued, especially with interest rates expected to rise sharply as the Federal Reserve struggles to bring soaring inflation under control. The central bank is expected to announce another interest rate hike on Wednesday.
“After the carnage of the last week and the first four months of the year, I wonder if we might not have another ‘sell the rumour, buy the news’ event when it comes to the Fed. “, said Willie. Delwiche, investment strategist at All Star Charts.
The S&P 500 rose 23.45 points to 4,155.38, while the Dow Jones added 84.29 points to 33,061.50. The blue-chip index rebounded from a 527-point deficit. The Nasdaq gained 201.38 points to 12,536.02.
Smaller company stocks also reversed course after spending much of the day in the red. The Russell 2000 Index rose 18.18 points, or 1%, to 1,882.91.
Just over half of S&P 500 stocks closed higher, with the technology and communications sectors driving much of the advance. Chipmaker Nvidia and Facebook parent company Meta Platforms each rose 5.3%.
The broader market often panders to the direction of technology stocks. Many companies in the sector have expensive stock values and therefore have more strength to push the major indexes up or down.
Still, it’s unusual for tech stocks to rally at the same time bond yields rise. Indeed, higher yields make bonds increasingly attractive assets relative to riskier and more expensive stocks, especially those in technology and other growth-oriented companies.
“The rise in yields so far this year has been bad news for growth stocks,” Delwiche said. “That you can have this rebound this afternoon in growth stocks as yields hold up is a little surprising.”
US crude oil prices remained relatively unchanged after slipping earlier in the day. EU energy ministers meet in Brussels to discuss Russian supply problems and sanctions. Russia’s invasion of Ukraine caused already high oil and natural gas prices to spike.
Bond yields rose significantly. The 10-year Treasury yield rose to 2.99% after briefly rising to 3.00% from 2.89% on Friday night. It had not exceeded 3% since December 3, 2018, according to Tradeweb.
Treasury yields have risen all year as investors brace for higher interest rates. Markets are expecting a very big interest rate hike this week from the Federal Reserve as it tries to rein in inflation, which is at its highest level in four decades.
The central bank is expected to raise short-term interest rates to double the usual amount when it releases its latest statement on Wednesday. It has already raised its key overnight rate once, the first such increase since 2018, and Wall Street expects several big increases in the coming months.
Fed rate hikes will further increase borrowing costs across the board for people buying cars, using credit cards and taking out mortgages to buy homes. Investors are worried about rising inflation and its impact on businesses and consumers. But they also worry about how rate hikes will play into the fight against inflation and whether a more aggressive Fed could actually hurt economic growth.
Concerns about rising inflation are also weighing on the latest round of corporate earnings. Disappointing earnings or outlook from Apple, parent Google and Amazon helped fuel sales last week. Investors are looking at the latest results and statements to gauge how much rising costs have impacted operations and whether price increases have hampered sales.
Wall Street is in for another busy week of earnings reports. Pfizer reports results Tuesday, CVS Health reports results Wednesday, and Kellogg reports results Thursday.
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Veiga reported from Los Angeles.