US stocks soared on Wednesday as Wall Street looked to recoup this week’s losses.
The S&P 500 rose 1.2% and the Dow Jones Industrial Average gained 300 points, or about 1%. The tech-heavy Nasdaq Composite rose more than 2%.
Bonds also advanced after the Fed’s hawkish speech on Tuesday, with the benchmark 10-year Treasury yield close to 2.8% and the 2-year yield topping 3.1%.
Upbeat economic data showing the US services sector rebounded in July helped improve sentiment on Wednesday. ISM’s services PMI hit 56.7 percent last month from June’s reading of 55.3, as supply chain problems appeared to ease.
In commodity markets, OPEC and its allies gave the green light for a small increase of around 100,000 barrels per day in oil production after calls from the US and other major consumers for more supply. The move, while symbolic, is expected to have little impact on prices. Crude oil traded near the day’s highs, with WTI (CL=F) just above $95 a barrel and Brent (BZ=F) to approximately $101.20.
Wednesday’s moves follow a down day on Wall Street that saw stocks close lower for the second consecutive session in the middle of a high-risk visit by House Speaker Nancy Pelosi to Taiwan that raised concerns about US-China relations.
CVS Stock (CVS) gained nearly 5% after the drugstore chain reported earnings that beat estimates and raised its guidance for the full year.
Starbucks (SBUX) shares rose 1.3% after the coffee house disclosed fiscal third-quarter earnings Tuesday night that greatly exceeded Wall Street estimates despite Inflationary pressures, labor costs, unionization efforts and the search for a permanent CEO clouded the quarter.
As economic data shows signs of slowing and companies continue to dim their outlook, analysts are making larger-than-average cuts to earnings-per-share estimates for S&P 500 companies for the third quarter. According to FactSet data, Wall Street lowered its consensus upstream EPS estimate by 2.5% from June 30 to July 28. Over the past five years, or 20 quarters, the average decline in upstream EPS estimate for the first quarter of a quarter has been 1.3%.
On Tuesday, investors digested the Fed’s hawkish rhetoric suggesting more interest rate hikes were being made as part of the central bank’s efforts to curb inflation. San Francisco Fed President Mary Daly said Tuesday that policymakers were “determined and completely united” on his goal of restoring price stability, with Chicago Fed President Charles Evans telling reporters that officials were “at least a couple of reports away” from seeing sufficient improvement in the data. of inflation to slow the pace of rate increases.
Meanwhile, St. Louis Fed President James Bulllard said the US Federal Reserve and the European Central Bank can still achieve a “relatively soft landing” as they tighten monetary conditions.
“I think the story for markets is still, ‘What’s going on with the Fed? What’s going on with tightening?'” Eric Theoret, global macro strategist at Manulife Investment Management, told Yahoo Finance Live on Tuesday. . “When it comes to geopolitics, it’s not really driving the market move right now.”
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc