Just days after the Dow Jones index entered a bear market, stocks are rising again. A positive update regarding Treasury yields has helped shift the market direction.
The 10-Year Treasury note is an important economic indicator. This afternoon, it surged by more than 4%. While this spike was brief, it helped signal a positive turnaround, generating the momentum that investors wanted to see. Anyone wondering why are stocks up today should look at the major market indices. The S&P 500 closed up nearly 2% today, just ahead of the Dow Jones Industrial Average and just behind the Nasdaq Composite.
Given the Nasdaq’s performance today, it makes sense that tech stocks would be gaining. Tesla (NASDAQ:TSLA) and Microsoft (NASDAQ:MSFT) both gained nearly 2%, and Amazon (NASDAQ:AMZN) gained just over 3%.
Let’s take a closer look at what inspired today’s events and what investors can expect in the coming weeks.
What’s Driving Stocks Up Today
For most investors, the most pressing question right now is when will markets finally rebound? The recent Federal Reserve rate hike caused more turbulence last week as high-growth stocks struggled to adjust yet again. InvestorPlace contributor Chris MacDonald recently addressed the when and why of economic recovery, noting the “conflicting signals” facing markets right now. As he reported:
It’s certainly entirely possible these higher interest rates could lead to a recession. However, until inflation comes down meaningfully toward the 2% target, the Federal Reserve has made it clear that higher interest rates are likely to stay. Accordingly, at least through 2023, we may be in for more pain than initially thought.
Today’s Treasury yield news could be considered a conflicting signal. While it came amid a steep bond selloff, it helped send markets up, signaling to investors that markets may be able to recover more quickly than anticipated. According to Yahoo Finance:
Sizable moves across fixed income and currency markets were in focus Wednesday morning as central bank and recessionary worries kept investors on edge. On the bond side, the benchmark 10-year Treasury note temporarily topped 4%, the highest level since 2008, before retreating to around 3.8%.
On top of this news, U.S. markets also received some help from across the Atlantic. The Bank of England decided to intervene in the United Kingdom’s government bond market. MarketWatch reported that “the Bank of England said that it was stepping into buy unlimited amounts of long-dated bonds to help stabilize markets after gilt yields soared and the pound slumped to a record low in the wake of last Friday’s U.K. budget announcements.”
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
