Wall Street rally eases as bond yields perk up

Bond yields backed off their rapid rise this week and Wall Street rebounded on Thursday as investors in Big Tech licked their wounds after Nasdaq’s slide into correction territory.

But concerns the Federal Reserve will be more aggressive in raising interest rates this year than the market has priced still weighed on confidence as investors look to the U.S. central bank’s policy meeting next week for fresh guidance.

Crude prices initially eased before climbing to fresh seven-year highs and the major indices on Wall Street sharply pared gains of more than 1per cent. The dollar edged up as the week’s big rally in U.S. Treasury yields showed signs of resuming.

Strong earnings reports helped lift 10 of 11 sectors of the S&P 500 into the black in a broad rally while the major stock indices in Europe also gained. MSCI’s U.S.-centric all-country world index rose almost 1per cent.

With all the noise about Fed tightening there has been little discussion about companies posting strong earnings, said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder.

“Companies are giving guidance as a quarter evolves. That’s a positive,” Ghriskey added. “It’s buying the dip. The market’s oversold. Are we going to go back to new highs? Eventually.”

Advancing shares on both the New York Stock Exchange and Nasdaq outpaced declining shares by about 2:1 ratio as gains in the three major indices of more than 1per cent ebbed on Wall Street.

The broad pan-European FTSEurofirst 300 index closed up 0.51per cent. On Wall Street, the Dow Jones Industrial Average rose 0.48per cent, the S&P 500 gained 0.45per cent and the Nasdaq Composite climbed 0.54per cent.

Investors have been concerned about rising rates because they raise borrowing costs and could dent global growth prospects and douse the earnings outlook for companies.

A Reuters poll of economists showed they expect the Fed to tighten monetary policy at a much faster pace than thought a month ago to tame high inflation.

Chair Jerome Powell will stick to the Fed’s message of tighter monetary policy next week as inflation has become a hot political issue, said Joe LaVorgna, chief economist for the Americas at Natixis.

“There’s no reason for him at the moment to deviate from what clearly has been a more hawkish script. That runs the risk of the markets maybe getting more nervous next week,” LaVorgna added.