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Market Snapshot: Dow rebounds over 500 points in final hour of trade as Treasury and UK government bond yields fall after BOE intervention

U.S. stock indexes on Wednesday turned higher, helped by a fall in Treasury yields and a surprise intervention from the Bank of England in the U.K. gilt, or government-issued bonds market.

How are stock indexes trading

The Dow Jones Industrial Average 
DJIA,
+1.66%

added 470 points, or 1.6% to 29,604

The S&P 500 
SPX,
+1.72%

gained 58 points, or 1.6% to around 3,705

The Nasdaq Composite 
COMP,
+12.45%

gained 155 points, or 1.4% to about 10,985

On Tuesday, the Dow Jones Industrial Average fell 126 points, or 0.43%, to 29135, the S&P 500 declined 8 points, or 0.21%, to 3647, and the Nasdaq Composite gained 27 points, or 0.25%, to 10830. The Nasdaq Composite was down 32.6% from its record high from November last year.

What’s driving markets

The S&P 500 rose 1.6%, climbing for the first time since the Federal Reserve hiked interest rates again a week ago, and received some support from a fall in Treasury yields but not before the 10-year yield
TMUBMUSD10Y,
3.718%

early on Wednesday breached 4% for the first time since the 2008 crisis. The yield on 30-year UK gilts plummeted more than one percentage point. 

The Bank of England said that it was stepping into buy unlimited amounts of long-dated bonds to help stabilize markets after gilt yields soared and the pound slumped to a record low in the wake of last Friday’s U.K. budget announcements. The BOE also postponed a planned sale of gilts for next week. The yield on the 10-year gilt BX:TMBMKGB-10Y skidded 52 basis points to 3.992%.

Bond markets have been leading stocks of late as investors fret that the Federal Reserve’s determination to combat inflation will continue to push borrowing costs higher, damaging the economy and corporate earnings.

“Our central market view has been that pressure towards tighter U.S. financial conditions is unlikely to end until the economy either enters a clear recession or shows sustained inflation progress,” wrote Dominic Wilson, economic analyst at Goldman Sachs.

See: Bond-market volatility touches one of highest levels since 2007-2009 financial crisis and recession

“We’ve just seen a lot of yield volatility. And I do expect that to continue because we have a lot of mixed messages from an economic perspective coming in, and it’s a very uncertain time,” said Daniel Berkowitz, senior investment officer at Prudent Management Associates.

Still, what the Fed is doing is going to have a much bigger impact on the future direction of the U.S. markets, noted Berkowitz.

See: Bank of England actions have no immediate implications for Fed policy, analyst says

The S&P 500 index on Tuesday fell for its sixth session in a row, shedding 6.5% over that period, and recording its longest losing streak since the beginning of the COVID-19 pandemic in February 2020.

Indeed the benchmark stock index has lost ground in eight of the last nine sessions, leaving its 14-day relative strength index momentum gauge at 27, where a figure below 30 is considered oversold territory.

See: ‘We are in deep trouble’: Billionaire investor Druckenmiller believes Fed’s monetary tightening will push the economy into recession in 2023

Billionaire investor Stanley Druckenmiller sees a “hard landing” for the U.S. economy by the end of 2023 as the Federal Reserve’s aggressive monetary tightening will result in a recession.  He said he doesn’t rule out “something really bad.”

“I will be stunned if we don’t have a recession in ‘23. I don’t know the timing but certainly by the end of ‘23. I will not be surprised if it’s not larger than the so-called average garden variety,” Druckenmiller said at CNBC’s Delivering Alpha Investor Summit on Wednesday.

Companies in focus

Biogen Inc.
BIIB,
+39.82%

shares surged over 37% on Wednesday after the pharmaceutical group said its experimental Alzheimer’s drug said their experimental drug significantly slowed cognitive and functional decline in the early stages of the disease. The results also gave a big boost to shares of Eli Lilly
LLY,
+6.89%

and Roche
ROG,
+0.85%
,
whose drugs target the same protein as Biogen.

Semiconductor company and Apple Inc. supplier STMicroelectronics N.V. STM’s shares tumbled 3.4% Wednesday, after news that Apple is dropping plans to boost iPhone production because an expected surge in demand didn’t materialize. Shares of Apple Inc.
AAPL,
-1.79%

fell 3.5%.

DocuSign Inc.
DOCU,
+4.14%

plans to lay off 9% of its workforce as it embarks on a restructuring plan, the electronic-signature company disclosed Wednesday. The company’s shares went up 4.5%.

Shares of VFC Corp. 
VFC,
-5.16%

fell 3.2% Wednesday, after the parent of Vans and The North Face apparel brands cut its full-year profit and sales outlook due to lower-than-expected fiscal second-quarter results.

— Jamie Chisholm contributed to this article.

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