Shares on Wall Street ended higher on Wednesday, as a selloff in technology-related stocks eased and a rotation into cyclical shares continued after Federal Reserve Chair Jerome Powell’s comments calmed inflation worries. Canada’s TSX also rose, closing within 10 points of its all-time high.
The Nasdaq index, which traded as much as 1.3% lower earlier in the session, regained its footing by early afternoon and closed higher. The Dow hit a record high earlier in the session.
GameStop Corp stock, which was at the center of volatile moves in late January amid much discussion on a Reddit forum, rose sharply in late trading, closing up 103%. Volume was more than two times the 10-day moving average, and shares continued to trade higher in the post market. The rally began around 2:30 pm ET Wednesday with no obvious catalyst.
The S&P/TSX Composite Index closed up 154.44 points, or 0.84%, at 18,484.53, not far from its record closing high of 18,492.50 on Feb. 16. The energy sector gained 2% as oil prices rose to fresh 13-month highs. Financials gained 1.6% as both Royal Bank of Canada and National Bank reported better-than expected-earnings. However, RBC shares closed slightly lower after it cautioned that it is too soon to tell whether anticipated loan losses will be avoided or simply delayed. Cannabis shares rallied sharply, with Aphria and Organigram Holdings both rising more than 10%.
Powell told lawmakers on Wednesday it may take more than three years to reach the central bank’s inflation goals, a sign the Fed plans to look beyond any post-pandemic spike in prices and leave interest rates unchanged for a long time to come.
“What’s driving the stock market is the fiscal stimulus, the dovish Fed, the real strong, strong earnings that we’re seeing, as well as the fact that we’re going to have a third vaccine,” said Richard Saperstein, chief investment officer at Treasury Partners.
Unofficially, the Dow Jones Industrial Average rose 424.51 points, or 1.35%, to 31,961.86, the S&P 500 gained 43.98 points, or 1.13%, to 3,925.35 and the Nasdaq Composite added 132.77 points, or 0.99%, to 13,597.97. All three main indexes were on track to post strong monthly gains, with the Dow and the S&P 500 set for their best month since November.
Investors have focused on rising U.S. yields and their potential impact on growth stocks. Saperstein said higher yields could pressure stocks but would not derail the upward trend.
“I don’t believe that the 10-year yield going from 1% to 1.5% is going to alter the calculus of owning large technology stocks,” said Saperstein.
Value-oriented stocks have enjoyed a bit of a bounce recently, and the S&P 500 Value index rose for a fourth straight day.
The S&P 500 financial sector hit an all-time peak, while other cyclical stocks including industrials, energy and materials also rose.
The S&P 500 Growth index, which includes most of the high-flying technology-related stocks, has come under pressure in the last few days due to valuation concerns, elevated Treasury yields and an investment shift into more economy-sensitive parts of the market.
Microsoft Corp, Amazon.com Inc and Apple Inc were down, while Facebook, Netflix Inc and Alphabet Inc reversed earlier declines.
Growth-oriented stocks are particularly sensitive to rising yields as their value rests heavily on future earnings, which are discounted more deeply when bond returns go up.
Tesla Inc gained 6% after star investor Cathie Wood’s Ark Invest fund bought a further US$171 million worth of the company’s shares in the wake of a sharp fall in the electric-car maker’s stock.
Oil prices climbed after U.S. government data showed a drop in crude output after a deep freeze disrupted production last week. U.S. crude oil production dropped last week by more than 10%, or 1 million barrels per day, during the rare winter storm in Texas, equaling the largest weekly fall ever, the Energy Information Administration said. Refinery crude inputs dropped to the lowest since September 2008 as the freeze knocked out power to millions.
“If you’re getting that kind of drop in one week of EIA production, you’re likely to get more after that,” said Phil Flynn, senior analyst at Price Futures in Chicago. “There is some concern that this will be a long-term permanent production drop.”
Traffic at the Houston ship channel was slowly coming back to normal but terminals were still facing several issues. After nearly a quarter of national refining capacity was idled by the freeze, refineries have also started to come back online this week.
Brent crude futures rose $1.67, or 2.6%, to settle at $67.04 a barrel. The global benchmark hit a session high of $67.30 a barrel, its loftiest since Jan. 8, 2020. U.S. West Texas Intermediate (WTI) crude futures ended $1.55, or 2.5%, higher at $63.22 a barrel, after touching $63.37, also their highest since Jan. 8, 2020.
The rally continued oil’s steady march to levels not seen since prior to the coronavirus pandemic as vaccine distribution increases and on forecasts for renewed demand.
Oil prices have rallied about 30% since the start of the year, boosted as well by ongoing supply cuts by the Organization of the Petroleum Exporting Countries and its allies.
Meanwhile, traders sent longer-term U.S. Treasury yields higher and steepened the yield curve on Wednesday but then pulled back some of those increases as Powell continued signaling the central bank will leave interest rates unchanged for a long time.
The benchmark U.S. 10-year yield was up 1.8 basis points at 1.3824% in afternoon trading. It had reached as high as 1.435% in the morning, its first time above 1.4% since a year ago, before settling as Powell gave a second day of testimony in Washington.
The Canadian 10-year bond yield rose at an ever greater pace on Wednesday, rising to a more than one-year high of 1.36% before pulling back slightly, to about 1.32%, by late afternoon.
In subdued trading, U.S. gold futures settled down 0.4% at $1,797.90.
On Wall Street, advancing issues outnumbered declining ones on the NYSE by a 2.10-to-1 ratio; on Nasdaq, a 2.62-to-1 ratio favored advancers.
The S&P 500 posted 102 new 52-week highs and no new lows; the Nasdaq Composite recorded 282 new highs and seven new lows.
Volume on U.S. exchanges was 13.68 billion shares, compared with the 16.01 billion average for the full session over the last 20 trading days.
Read more: Stocks that saw action Wednesday - and why
With files from Reuters
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.
Darcy Keith