Dow makes 612-point turnaround as Nasdaq leads rebound in final hour of trading

What drove markets

Stocks rallied in the final hour of trading, as yields for Treasury maturities from 5 to 30 years out closed at or above 3% for the first time since Nov. 9, 2018, according to Dow Jones Market Data. The yield on the 10-year Treasury note BX:TMUBMUSD10Y jumped 11 basis points to 2.995%. Yields rise when investors are selling off government debt.

“For a lot of people, there was a little bit of an exhausted move with the bond-market selloff,” said Edward Moya, senior market analyst for the Americas at OANDA Corp. “When the 10-year broke through 3%, that signaled the bond-market selloff had hit its peak and probably won’t continue until we get beyond the Fed,” which releases its policy decision on Wednesday, he said via phone.

Investors are keenly focused on the Federal Reserve, which is expected to deliver its first half-point rate hike in almost 22 years. Traders of fed-funds futures also see an 86% likelihood that the Federal Reserve delivers a 75 basis point rate hike in June, up from 19% a month ago, based on the CME FedWatch Tool.

See: A half-point Fed rate hike seen already baked in the cake

Intense inflationary pressures, plus broad supply and labor bottlenecks, were reflected in the Institute for Supply Management’s index of U.S. manufacturing activity on Monday: That index fell 1.7 points to 55.4% in April and showed the industrial side of the economy grew at the slowest clip in 18 months. Economists polled by The Wall Street Journal had expected the index to rise to 57.8% from a one-and-a-half year low of 57.1% in March. Any number above 50%, nonetheless, still signifies growth.

“We got through soft U.S. economic data and we’re entering a period of calm where we will see stocks consolidate from here,” OANDA’s Moya said.

Read: Farewell TINA? Why stock-market investors can’t afford to ignore rising real yields.

Some attention was focused on data from China over the weekend that showed manufacturing activity dropped to a six-month low in April as lockdowns continued in Shanghai and other manufacturing hubs amid Covid-19 outbreaks.

Over the weekend, Berkshire Hathaway Inc.
BRK.A,
-1.28%

BRK.B,
-1.44%
reported stronger-than-forecast earnings after buying back $3.2 billion in stock. Chairman and CEO Warren Buffett told shareholders that a “casino”-like market environment allowed the conglomerate to quickly build up a stake in Occidental Petroleum Corp.
OXY,
+5.83%,
as he also revealed that he’s back in the merger arbitrage business after buying up just shy of 10% of Activision Blizzard Inc.
ATVI,
+3.25%,
the videogame maker that’s agreed to be purchased by Microsoft Corp.
MSFT,
+2.50%.
Activision shares finished up by 3.3%.

Also read: At the Berkshire Hathaway annual meeting, Warren Buffett aims to assure shareholders

Which companies were in focus?

• European Union antitrust authorities have told Apple Inc.
  AAPL,
  +0.20%
  that they have formed a preliminary view that it has abused its dominant position in markets for mobile wallets. Apple shares still closed up by 0.2%.

How did other assets fare?

• The ICE U.S. Dollar Index
  DXY,
  -0.25%,
   a measure of the currency against a basket of six major rivals, was up 0.7%.

• Oil futures ended higher. West Texas Intermediate crude for June delivery 
  CLM22,
  +0.21%
  settled at $105.17 a barrel, up 48 cents or 0.5%, on the New York Mercantile Exchange.

• Gold
  GC00,
  -0.04%
  finished with its worst daily loss in nearly two months, with futures shedding 2.5% to settle at $1,863.60 per ounce.

• The Stoxx Europe 600
  SXXP,
  -1.46%
  closed down by 1.5%, while London markets were closed for the early May bank holiday. European equities were briefly rattled after a “flash crash” that appeared to hit Nordic markets hard.

• Japan’s Nikkei 225
  NIK,
  -0.11%
  finished 0.1% lower on Monday. The Shanghai Composite
  SHCOMP,
  +2.41%
    and the Hang Seng Index 
  HSI,
  +4.01%
    in Hong Kong were both closed for the Labor Day holiday.

—Barbara Kollmeyer and Steve Goldstein contributed to this article.