Stocks bounce after back-to-back losses

U.S. stocks rallied on Wednesday, led by gains in the technology sector, as strong earnings and economic data boosted sentiment on Wall Street after two straight sessions of losses.

The S&P 500 jumped 1.6% and the Dow Jones Industrial Average gained 415 points, or about 1.3%. The tech-heavy Nasdaq Composite rose 2.6%.

Treasuries were also pushed forward after the aggressive Fedspeak on Tuesday, with the yield on the benchmark 10-year note holding well above 2.7% and the 2-year yield near 3.1%.

Economic data on Wednesday that showed the US services sector picked up in July helped at least temporarily ease some concerns that a recession was inevitable. The ISM Services PMI rose to 56.7% last month in a surprise jump from 55.3 in June as supply chain issues appeared to ease.

St. Louis Federal Reserve Bank President James Bullard also said he does not believe the US economy is in a recession in a televised interview with CNBC.

Shares of Robinhood ( HOOD ) closed down nearly 12%, a day after the brokerage said it would lay off nearly a quarter of its staff and reported its sixth straight quarterly loss.

Shares of CVS ( CVS ) gained 6.2% after the drugstore chain reported earnings that beat estimates and raised full-year guidance.

Shares of Starbucks ( SBUX ) rose 4.3% after reporting fiscal third-quarter earnings late Tuesday that largely beat Wall Street estimates despite inflationary pressures, labor costs, unionization efforts and the search for a permanent CEO clouding the quarter.

Meanwhile, shares of AMD ( AMD ) fell 1.2% after the chipmaker warned of a worse-than-expected third quarter late Tuesday.

As economic data shows signs of slowing and companies continue to cut their outlooks, analysts are making larger-than-average cuts to earnings per share estimates for S&P 500 companies for the third quarter. Wall Street cut its bottom-line EPS consensus estimate by 2.5% from June 30 to July 28, according to FactSet data. Over the past five years – or 20 quarters – the average decline in the bottom-up EPS estimate in the first month of a quarter was 1.3%.

The exterior of the Marriner S. Eccles Federal Reserve Board building is seen in Washington, DC, U.S., June 14, 2022. REUTERS/Sarah Silbiger

The exterior of the Marriner S. Eccles Federal Reserve Board building is seen in Washington, DC, U.S., June 14, 2022. REUTERS/Sarah Silbiger

In commodities markets, OPEC and its allies ignited a small increase in oil output by about 100,000 barrels a day after calls from the US and other big consumers for more supply. The move, although symbolic, is expected to have little impact on prices. Crude oil retreated from a daily high in the afternoon, with WTI (CL=F) just above $92 a barrel and Brent (BZ=F) around $98.20.

Wednesday’s moves follow a bearish day on Wall Street that saw stocks close lower for a second straight session amid a visit by House Speaker Nancy Pelosi to Taiwan that raised concerns about US-China relations.

On Tuesday, investors digested hawkish Fedspeak that suggested more rate hikes were on the way in the central bank’s efforts to curb inflation. San Francisco Fed President Mary Daly said Tuesday that policymakers were “resolute and fully united” in their goal of restoring price stability, and Chicago Fed President Charles Evans told reporters that officials they were “at least a few exposures” away from seeing enough improvement. inflation data to reduce rate hike rates.

Meanwhile, St. Louis Federal Reserve President James Bullard said the U.S. Federal Reserve and European Central Bank could still achieve a “relatively soft landing” as they tighten monetary conditions.

“I think the story for the markets is still, ‘What’s wrong with the Fed? What’s up with the tightening?’ Yahoo Investment Management Global Macro Strategist Eric Theoret said on Yahoo Finance Live on Tuesday. “In terms of geopolitics, it’s not really driving market movement right now.”

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

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