US stocks rebound after strong economic updates

The US stock market rebounded on Wednesday from two days of punishing swings after oil prices stopped spiking and reports gave encouraging updates on the economy.

The S&P 500 rose 0.8% and made back most of its losses since the war with Iran began. The Dow Jones Industrial Average climbed 238 points, or 0.5%, and the Nasdaq composite climbed 1.3%.

Uncertainty keeping markets volatile

Uncertainty about the war has sent prices in financial markets careening up and down this week, with most taking their cues from what the price of oil is doing.

Oil prices moderated as trading moved westward across the Atlantic. After briefly topping $84, the price for a barrel of Brent crude, the international standard, settled at $81.40, back to where it was a day earlier. A barrel of benchmark US crude rose 0.1% to $74.66.

Stocks also got a boost from signs of strength for the US economy.

One report said growth for US businesses in the real estate, finance and other services industries accelerated last month at the fastest pace since 2022. Encouragingly for inflation, it also said prices for such businesses are increasing at a slower rate, at least before the war with Iran began.

A second report suggested US employers outside of the government picked up their hiring last month. That could be a hopeful signal for the more comprehensive report coming on Friday from the US government about the overall job market.

In financial markets, worries are centred on how long the war with Iran could last, how high inflation will go because of more expensive oil and how much corporate profits will sink because of it.

Markets can recover from war shocks quickly

The US stock market has a history of shaking off military conflicts in the Middle East relatively quickly, though that comes with the caveat that oil prices don’t jump too high. That has some professional investors suggesting patience through the volatility, at least when it comes to financial markets.

On Wall Street, a mix of companies helped drive Wednesday’s rise.

Retailers and travel companies strengthened with hopes that a solid economy and an easing for jumps in gasoline prices will mean their customers may have more to spend.

Big Tech stocks, meanwhile, were the strongest forces lifting the market. Amazon rose 3.9%, and Nvidia added 1.7%. Because they’re among the biggest stocks in the US market in terms of total value, their movements carry more weight on the S&P 500.

All told, the S&P 500 rose 52.87 points to 6,869.50. The Dow Jones Industrial Average climbed 238.14 to 48,739.41, and the Nasdaq composite rallied 290.79 to 22,807.48.

Treasury yields lift

In the bond market, Treasury yields ticked higher after jumping early in the week with worries about worsening inflation. The yield on the 10-year Treasury rose to 4.09% from 4.06% late Tuesday.

Wednesday’s strong reports on the economy were welcome news for the Federal Reserve, whose job it is to keep the US job market healthy and inflation low. The Fed’s job has become more difficult because of the jump in oil prices, which is pushing upward on already high inflation.

The Fed could keep interest rates high to keep a lid on inflation. But high interest rates would also keep it more expensive for US households and companies to borrow money, grinding down on the economy.

The central bank had indicated it planned to resume its cuts to interest rates later this year, in hopes of giving a boost to the job market and economy. Because of the war and higher oil prices, traders have pushed their forecasts further into the summer for when the Fed could begin cutting rates again.

The Associated Press