Broad Rally Pushes Stock Indexes Higher
Author
Publisher
Date Published

U.S. stocks rose for a third consecutive session, cutting into major indexes’ August losses as shares from technology to industrials and financials advanced.

The S&P 500 notched its largest three-day gain since March, paring its decline this month to 2%. A drop in government bond yields, which have climbed lately, eased pressure on stocks.

The broad stock index advanced 1.5% as all 11 sectors pushed higher. The Dow Jones Industrial Average added 0.8%, or about 293 points. The tech-heavy Nasdaq Composite rallied 1.7%.

Investors this week are scrutinizing a flood of economic releases as they try to anticipate the market’s next moves. Data Tuesday added to signs of a cooling economy: Employers reported fewer open jobs last month, while a closely watched measure of consumer confidence tumbled in August. 

Stock gains accelerated after the releases, showing how focused traders are on any sign that inflation may ease sufficiently to head off additional interest-rate increases by the Federal Reserve.

If consumers are growing more cautious “then maybe the Fed can park out at these levels, as opposed to raising rates higher,” said Jerry Braakman, chief investment officer at First American Trust.

Investors moved toward the safety of bonds, pulling the yield on the benchmark 10-year U.S. Treasury note down to 4.121%, from 4.210% on Monday. Shorter-term bond yields dropped as well, with the two-year note’s yield falling to 4.888%, from 5.048% on Monday.

Growth-oriented sectors such as communication services, consumer discretionary, and technology led the market Tuesday, while the Nasdaq Composite recorded its best day in a month. Those groups of stocks can be particularly responsive to changes in interest rates, since they are often valued based on expectations of growth far into the future. 

Tech and other growth stocks have pulled the market higher in 2023, with the tech sector advancing 42% compared with a 17% climb by the S&P 500. 

Some investors said they believe the market’s laggards are due for a comeback. The utilities sector, for example, is down 10% this year, while the energy segment is about flat.

“At some point, the relative attractiveness of the stocks that have been left behind becomes so great you can’t ignore them,” said Grace Lee, senior portfolio manager at Columbia Threadneedle Investments.

The question of what the Fed will do next continues to hang over the market after the central bank’s chair, Jerome Powell, said Friday that inflation remains too high and that officials are open to raising rates further if needed.

Investors will parse a new release of the Fed’s preferred gauge of inflation, the personal-consumption expenditures price index, on Thursday. The next monthly jobs report is due Friday.  

Among individual stocks, shares of Best Buy gained 3.9% after the retailer reported a smaller decline in sales than Wall Street analysts had projected.

Bitcoin jumped 6.3% Tuesday, after a federal appeals court ruled that the Securities and Exchange Commission must reconsider asset manager Grayscale Investments’ application to launch the first bitcoin exchange-traded fund. Shares of crypto exchange Coinbase Global jumped 15%, climbing alongside other crypto assets. 

Stocks mostly rose overseas. The Stoxx Europe 600 advanced 1%, while in Asia, the Shanghai Composite gained 1.2% and the Hang Seng climbed 1.9%.

Oil prices rose, with global benchmark Brent crude gaining 1.3% to $85.49 per barrel.