NEW YORK (AP) — Stocks ended broadly higher on Wall Street on Tuesday, recouping some of the ground lost in their worst weekly decline since the pandemic began.
The rally to start the shortened holiday week came as investors eagerly await what Federal Reserve Chairman Jerome Powell will tell Congress on Wednesday, the first of two days of testimony as part of the semi-annual report on the central bank monetary policy. Last week, the Fed raised its main short-term interest rate to the highest since 1994, the central bank’s latest effort to rein in the worst inflation in 40 years.
The S&P 500 rose 2.4%, recouping about 40% of its losses last week. More than 85% of stocks in the benchmark index gained ground. The Dow Jones Industrial Average rose 2.1% and the Nasdaq 2.5%.
“This is a bit more of an oversold bounce as the market looks at and tries to figure out which path the Federal Reserve is really going to take,” said Rob Haworth, senior investment strategist at US Bank Wealth Management.
Tech stocks have seen some of the biggest gains. Apple rose 3.3% and Microsoft 2.5%.
Retailers, healthcare companies and banks also made strong gains. Kellogg rose 2% after the maker of Frosted Flakes and Rice Krispies announced it would split into three companies. Spirit Airlines jumped 7.9% after JetBlue softened its bid for the low-cost airline.
European markets ended mostly higher, while Asian markets closed mixed overnight. The 10-year Treasury yield rose to 3.30% from 3.23% on Friday night. Markets were closed on Monday for the June 19 observation.
In total, the S&P 500 rose 89.95 points to 3,764.79. The index, however, remains stuck in a slump, like all other major indexes, and is still down 21.5% from the record high it set in January. It has posted a weekly loss in 10 of the past 11 weeks.
The Dow rose 641.47 points to 30,530.25, while the Nasdaq added 270.95 points to 11,069.30.
Small company stocks also gained ground. The Russell 2000 rose 28.34 points, or 1.8%, to 1,694.03.
Stocks have mostly fallen in recent weeks as investors adjust to the higher interest rates the Federal Reserve and other central banks are increasingly doling out. The aggressive rate hikes are part of a plan to temper record inflation, but investors fear the Fed could slow economic growth too much and trigger a recession.
Inflation and interest rate concerns were compounded by a spike in energy prices following Russia’s invasion of Ukraine. The price of U.S. crude oil rose 1% to settle at $110.65 a barrel on Tuesday. That’s up about 52% for the year. This has taken a bigger bite out of people’s wallets at the gas pump and is causing spending to slow elsewhere.
The persistent list of worries has created an extremely turbulent market. Daily swings between gains and losses have been common, and the major indices have occasionally swung between large gains and losses on an hourly basis.
“In these types of markets, you just get more volatility in both directions,” said Ross Mayfield, investment strategist at Baird. “The whole market is shaped by the Fed and the inflation numbers.”
Last week, the Fed raised its main short-term interest rate to three times the usual amount. It also just started allowing some of the trillions of dollars of bonds it bought during the pandemic to come off its balance sheet. This should put upward pressure on longer-term interest rates and is another way for central banks to withdraw previously buoyant supports under the markets to support the economy.
The Fed’s moves come as some discouraging signals have emerged about the economy, including lower spending at retailers and gloomy consumer sentiment. The National Association of Realtors reported on Tuesday that sales of previously occupied U.S. homes have slowed for the fourth consecutive month. The housing market, a crucial part of the economy, is slowing as home buyers face record prices and significantly higher financing costs than a year ago following a rapid rise mortgage rates.
Wall Street will be listening closely for clues about the Fed’s plans for possible additional rate hikes when Powell speaks before Congress this week. The central bank could consider another such mega-hike at its next meeting in July, but Powell said increases of three-quarters of a percentage point would not be common.
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Veiga reported from Los Angeles.
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