Stocks Open Higher, While Bond Yields Edge Down


U.S. stocks and government-bond prices clawed back some of Tuesday’s losses, as investors prepare for central banks globally to raise interest rates.

The S&P 500 rose 0.4% in early trading Wednesday. The benchmark gauge lost 1.8% Tuesday, its second decline in three trading days. The technology-heavy Nasdaq Composite Index added 0.5% and the Dow Jones Industrial Average rose 0.3%, or 91 points.

Some of the U.S.’s biggest lenders reported rising earnings before the market opened. Bank of America shares rose 4.7% after the lender reported a jump in fourth-quarter profits, while Morgan Stanley’s shares gained 3.7% on profits that topped forecasts. U.S. Bancorp fell 5.2% after the bank holding company posted a rise in compensation costs. This earnings season, Goldman Sachs,

JPMorgan Chase

and

Citigroup

have also reported shelling out more in compensation

Procter & Gamble

said consumers were undeterred by higher prices, leading to higher revenue and lifting shares of the consumer-goods company 0.2%. Earnings are due from

Alcoa

and United Airlines after markets close.

Investors have stepped up bets that major central banks will tighten monetary policy.



Photo:

Wang Ying/Zuma Press

Government-bond prices edged up, pushing down yields. Yields on benchmark 10-year Treasury notes slipped to 1.859% from 1.866% Tuesday, which was their highest level since January 2020. Yields on interest rate-sensitive two-year notes were down slightly to 1.035% from 1.038% Tuesday.

Europe’s most closely watched government bond yield turned positive for the first time since 2019. The yield on 10-year German bund rose as high as 0.021% Wednesday after trading in negative territory for over 30 months. It then eased to 0.010%. Ten-year U.K. yields, meanwhile, reached their highest level since March 2019 after data showed inflation hitting a 30-year high.

In Tokyo,

Sony Group

lost 13% following gaming rival Microsoft’s deal to buy Activision Blizzard, maker of World of Warcraft and Call of Duty. The drop was Sony’s biggest since 2008.

European luxury-good stocks rose after Switzerland’s Cie. Financière Richemont reported forecast-beating results. Richemont shares added 7.5% and LVMH Moët Hennessy Louis Vuitton rose 3.7% in Paris.

Investors have stepped up bets that the Federal Reserve and other major central banks will tighten monetary policy in the coming months, withdrawing a pillar of support for markets. Mounting expectations of interest-rate rises follow evidence that the drivers of inflation have broadened beyond the supply-chain shock that fueled price gains for much of 2021.

To keep out Covid-19, China closed some border gates late last year, leaving produce to rot in trucks. Restrictions like these and rules at some Chinese ports, the gateways for goods headed to the world, could cascade into delays in the global supply chain. Photo composite: Emily Siu

Recent volatility is “really all about inflation and how aggressive central banks are going to be to counteract it,” said Brian O’Reilly, head of market strategy at Mediolanum Asset Management, adding that inflation could also curtail economic growth by knocking consumption. ”Certainly, the market is nervous at the moment.”

In the U.K., data out Wednesday showed consumer prices rising at 5.4% in December, the fastest rate since March 1992—shortly before the country was compelled to leave the European Exchange Rate Mechanism on ‘Black Wednesday.’ The pace of price growth was far above the 2% target set by the Bank of England, which in December became the first major central bank to raise rates since the start of the pandemic.

Oil prices rose again after touching seven-year highs Tuesday. Most-active U.S. crude futures rose 0.8% to $85.54 a barrel, extending a rally driven in part by the potential for supply disruptions in Russia and the Middle East.

Overseas stock markets were mixed following Tuesday’s selloff on Wall Street. The Stoxx Europe 600 rose 0.5%, as gains for retail and resource stocks offset losses for food, drink and insurance companies. Asian stocks came under pressure, with Japan’s Nikkei 225 skidding 2.8% as Sony slumped. China’s Shanghai Composite Index slipped 0.3%.

Write to Joe Wallace at joe.wallace@wsj.com

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