U.S. Stocks Rebound, on Pace for Monthly Gains
U.S. stocks rebound
-- Boeing rallies after earnings
-- Treasury yields slightly lower ahead of Fed statement
U.S. stocks rebounded Wednesday following their worst two-day stretch in months, lifted by the latest round of corporate earnings.
The Dow Jones Industrial Average rose 250 points, or 1%, to 26327 shortly after the opening bell. The S&P 500 rose 0.6% and the Nasdaq Composite added 0.7%.
Even with recent declines, the Dow industrials and S&P 500 were on track for their largest one-month percentage gains in more than 18 months.
Some investors said recent declines were healthy following a rapid run-up in stocks that pushed major indexes to fresh records. They added that a positive earnings and economic backdrop remains intact following recent tax changes.
Boeing shares added 6.4%, boosting the Dow industrials, after the aerospace giant forecast a higher profit margin and a big rise in cash generated from record jetliner deliveries.
Shares of Electronic Arts rose 7.6% after posting sharp growth in live services revenue in the holiday quarter, while Xerox gained 6.1% after shrinking its loss and sealing a deal in which Japan's Fujifilm Holdings will take a majority stake.
A recent rise in Treasury yields that raised some investor concerns about higher inflation and less accommodative central-bank policy moderated slightly Wednesday. The yield on the benchmark 10-year U.S. Treasury note fell to 2.703%, according to Tradeweb, from 2.725% Tuesday -- its highest level since April 2014. Yields fall as bond prices rise.
Investors were parsing President Donald Trump's first State of the Union address and awaiting a Federal Reserve statement following the conclusion of its two-day meeting. This week's meeting is Chairwoman Janet Yellen's final meeting as leader of the central bank. The Fed is expected to leave interest rates unchanged but could offer fresh clues about its 2018 outlook.
While stocks and bond yields have often climbed together in the past, some analysts have said a rapid move higher in yields can hurt steady dividend-payers in the stock market and trigger wider concerns about risky assets.
"When markets are trading on an expensive valuation plane, they become acutely sensitive to any shift in expectations that the benign economic environment is going to be challenged," said Matt Merritt, global head of multiasset strategy at Insight Investment.
Since the Fed's last meeting, the labor market has remained strong, the dollar has weakened and commodity prices have risen, which combined should point to tighter monetary policy ahead, analysts say.
"What we're reckoning with here is the end of this era of very easy money," said Kathy Jones, chief fixed income strategist for Schwab Center for Financial Research. The market still has some room to price in more interest-rate increases in the coming years to match the Fed's projections, she noted.
Elsewhere, the Stoxx Europe 600 rose less than 0.1% in afternoon trading following its biggest daily fall of the year. Shares of Swedish household-appliance maker Electrolux jumped 8.6% after it reported higher fourth-quarter profits, helping offset steep post-earnings declines from telecommunications-equipment maker Ericsson, fashion retailer Hennes & Mauritz and U.K. outsourcing group Capita, which shed 43% after suspending its dividend and issuing a profit warning.
Earlier, Hong Kong's Hang Seng rose 0.9% as gains accelerated near the end of trading, finishing the month up 9.9% -- its best month since April 2015. Japan's Nikkei ended down 0.8% as the yen strengthened against the dollar.
--Amrith Ramkumar and Kenan Machado contributed to this article.
Write to Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
January 31, 2018 10:11 ET (15:11 GMT)