Stocks rally as Treasury yields retreat, Bank of England pivots

U.S. stocks surged Wednesday afternoon as Treasury yields retreated from a sharp ascent and investors cheered on a surprise policy pivot by the Bank of England.

The S&P 500 bounced roughly 2%, while the Dow Jones Industrial Average gained nearly 550 points, or 1.9% after both major averages hit fresh 2022 lows this week. The Nasdaq Composite rallied about 2.1%.

The moves in the U.S. came as, across the Atlantic, England’s central bank said it would carry out temporary purchases of long-dated U.K. government bonds, an emergency intervention to help stabilize its currency.

“Were dysfunction in this market to continue or worsen, there would be a material risk to U.K. financial stability,” BoE officials said in a statement Wednesday morning. “This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.”

Sizable swings across fixed income and currency markets were in focus Wednesday morning as interest rate and recessionary worries kept investors on edge. On the bond side, the benchmark 10-year Treasury note — a key economic linchpin — logged its biggest drop since 2009 to 3.7% after spiking above 4%.

“Long-dated U.S. Treasury price volatility is hitting statistically unusual levels right now, just as it did in June 2022,” DataTrek’s Nicholas Colas said in a morning note. “U.S, equities bottomed in that month once yields stabilized.”

In commodities, oil notched its biggest gain since July amid declining US inventories. West Texas Intermediate (WTI) crude oil settled 4.6% higher at $82.15 per barrel.

On the corporate front, shares of Apple (AAPL) fell 1.3% after a report the tech giant is backing off plans to increase production of its new iPhones this year after demand for the product failed to meet expectations.

Analysts at Morgan Stanley expressed skepticism over the news, calling reports “more bark than bite,” and noting that “the upside from better-than- expected iPhone 14 Pro/Pro Max demand is likely being offset by weaker initial iPhone 14/14 Plus demand does not imply any downside to its iPhone shipment forecasts.”

NEW YORK, NEW YORK - SEPTEMBER 13: Traders work on the floor of the New York Stock Exchange during afternoon trading on September 13, 2022 in New York City. U.S. stocks opened lower today and closed significantly low with the Dow Jones dropping over 1,200 points after the release of an inflation report that showed prices rising more than expected in the last month. The Consumer Price Index released by the Bureau of Labor Statistics showed prices rising 8.3% over the last year, for which economists had predicted an 8.1% increase. (Photo by Michael M. Santiago/Getty Images)

NEW YORK, NEW YORK – SEPTEMBER 13: Traders work on the floor of the New York Stock Exchange during afternoon trading on September 13, 2022 in New York City. (Photo by Michael M. Santiago/Getty Images)

Elsewhere, shares of DocuSign (DOCU) advanced 5% after the company said it expects to restructure and reduce its workforce by approximately 9%.

Biogen (BIIB) stock surged roughly 40% on Wednesday after a successful trial of its experimental Alzheimer’s drug. News that the test slowed the progress of Alzheimer’s by 27% compared to a placebo in a clinical experiment also buoyed shares of pharma peers like Eli Lilly (LLY), which rose more than 7%.

Some Wall Street giants have turned more bearish on stocks, flagging the risk of a global recession as central banks take the most aggressive monetary action in decades.

Strategists at BlackRock’s (BLK) Investment Institute said that policymakers were downplaying the extent of economic pain needed to rapidly reduce inflation.

“Markets haven’t priced that so we shun most stocks,” a team led by Jean Boivin said in a note earlier this week.

Goldman Sachs (GS), Wall Street’s premier investment bank, cut equities to underweight in its global allocation over the next three months, citing rising real yields as a headwind.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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Source: https://finance.yahoo.com/news/stock-market-news-live-updates-september-28-2022-112213537.html