Technology shares pulled major U.S. stock indexes higher Wednesday as concern about the potential for a rise in interest rates eased.
The S&P 500 rose 0.4%, while the tech-heavy Nasdaq Composite advanced 0.6% after a sharp decline Tuesday. The Dow Jones Industrial Average added 0.1%, or about 40 points.
Stocks resumed their upward trajectory after Treasury Secretary Janet Yellen walked back comments that interest rates might need to rise to keep the economy from overheating.
She clarified after markets closed Tuesday that she was neither predicting nor recommending that the Federal Reserve raise rates. Inflation isn’t likely to be a problem, and the Fed can handle it if it does become an issue, she said at The Wall Street Journal’s CEO Council Summit.
“Today is a bit of a relief rally,” said Edward Park, chief investment officer at Brooks Macdonald. “Markets are grinding higher and they are grinding higher on a relative basis because equities remain the most attractive.”
Strong earnings growth and signs that the economy is rebounding quickly are helping boost sentiment, Mr. Park said. “But there is this growing question of how long will monetary policy remain accommodative,” he added.
Money managers said inflation and the Fed’s potential response may become a bigger concern in the second half of the year. Stocks are likely to continue to rally as long as people agree with the Fed’s view that the recent climb in inflation will prove to be fleeting, they said.
“Either the Fed is correct or they are very, very wrong,” said
global head of macro at Fidelity International. “It is entirely possible that the market oscillates between these two scenarios” for the next few months, he added.
The yield on the benchmark 10-year U.S. Treasury note edged up to 1.598%, from 1.591% Tuesday. Bond yields rise when prices fall.
Among individual stocks, shares of
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climbed 5.1% after the videogame publisher reported a higher first-quarter profit. Zillow Group shares gained 1.7% after the company swung to a quarterly profit due to the strong housing market.
shares added 4.3% after the telecommunications company topped first-quarter revenue and earnings expectations.
General Motors shares rose 3.2% after the company said early Wednesday that it expects to hit the high end of its estimated 2021 profit range, with strong pricing and brisk new-vehicle demand helping offset the financial impact of a vexing chip shortage.
With about three-quarters of S&P 500 companies having reported this earnings season, profits are projected to have grown 48% in the first quarter from a year earlier, according to FactSet. That’s a big improvement from the 16% growth analysts predicted at the end of December.
Overseas, the pan-continental Stoxx Europe 600 rallied 1.6%, recovering its Tuesday losses. In Hong Kong, the Hang Seng Index fell 0.5%. Markets in Japan, South Korea and mainland China were closed for public holidays.