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Wall Street stocks recovered Wednesday from steep losses in the previous session as an accelerating bond rout took a breather and investors braced for the fallout from the historic ouster of the US House Speaker.
The Dow Jones Industrial Average (^DJI) turned up 0.4%, or more than 125 points, after a brutal sell-off in stocks Tuesday that sent the benchmark into the red for the year. (It is now roughly flat.) The S&P 500 (^GSPC) was up 0.8%, and the tech-heavy Nasdaq Composite (^IXIC) led gains, rising more than 1.3% for its best day in about five weeks.
The indexes suffered deep losses Tuesday as US government bond yields climbed, with the 30-year Treasury yield (^TYX) reaching 5% for the first time since 2007. Yields have since tipped lower, pulling the 10-year yield (^TNX) back below 4.8%.
The recent sell-off in stocks is all about the “pain trade” in bonds, some strategists believe, as investors increasingly accept the era of low interest rates is coming to an end. That has driven a fundamental shift in how investors think about everything from stocks to currencies and the role bonds play in their portfolios.
Two more Federal Reserve officials on Tuesday joined colleagues in hammering home the message that rates are likely to stay high for a long time — a message that has spurred the surge in yields.
At the same time, higher-than-expected job openings boosted bets for another hike this year. On Wednesday, however, a report from ADP on private-sector hiring found the slowest level of job growth last month since 2021. The next key reading on the US labor market will be the monthly payrolls print on Friday, likely to be closely watched for yet another sign the Fed has even more to do.
The historic ouster of House Speaker Kevin McCarthy on Tuesday ramped up the uncertainty in the market, given voting in a replacement likely means weeks of chaos and gridlock for other business. That heightens the odds of a US government shutdown that could disrupt the economy, with a deadline due in just weeks.
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