Just a few days after the Dow Jones the index has entered a bear market, stocks are up again. A positive update on Treasury yields helped change the direction of the market.
The 10-year Treasury bill is an important economic indicator. This afternoon, it jumped more than 4%. Although this spike was brief, it helped signal a positive turnaround, generating the momentum investors wanted to see. Anyone wondering why stocks are up today should look at the major stock indices. The S&P500 closed nearly 2% higher today, just ahead of the Dow Jones Industrial Average and just behind the Nasdaq Compound.
Given the performance of the Nasdaq today, it makes sense that tech stocks would gain. You’re here (NASDAQ:TSLA) and Microsoft (NASDAQ:MSFT) both gained almost 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 weeks ahead.
What is driving stocks up today
For most investors, the most pressing question right now is when will the markets finally rebound? The Federal Reserve’s recent rate hike caused more turbulence last week, with high-growth stocks still struggling to adjust. InvestorPlace Contributor Chris MacDonald recently addressed the timing and why of the economic recovery, noting the “mixed signals” markets are currently facing. As he reported:
It is certainly entirely possible that these higher interest rates will lead to a recession. However, until inflation comes down significantly towards the 2% target, the Federal Reserve has made it clear that higher interest rates should stay. As a result, at least until 2023, we may have a harder time than initially thought.
Today’s Treasury yield news could be seen as a mixed signal. Although it came amid a strong bond sell-off, it helped push markets higher, signaling to investors that markets may be able to rally faster than expected. According Yahoo finance:
Big moves in the fixed income and currency markets were the focus on Wednesday morning as central bank and recession worries kept investors on edge. On the bond side, the benchmark 10-year Treasury note temporarily rose above 4%, the highest level since 2008, before falling to around 3.8%.
In addition to this news, US markets also received help from across the Atlantic. The Bank of England has decided to intervene in the UK government bond market. MarketWatch reported that “the Bank of England said it was preparing to buy unlimited amounts of long-term bonds to help stabilize markets after gilt yields soared and the pound fell to a record high following last Friday’s UK budget announcements”.
At the date of publication, Samuel O’Brient held (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.