NEW YORK — Wall Street had its best day since June as pressure on stocks from the bond market relaxed a bit. The S&P 500 rose 1.1% Wednesday, trimming its loss for August. The Dow added 184 points, and the Nasdaq composite climbed 1.6%. Treasury yields eased in the bond market after a report suggested the surprisingly resilient U.S. economy is cooling. Big Tech stocks and others that benefit from easier interest rates led the market. Nvidia climbed 3.2% ahead of its highly anticipated profit report. Nvidia and other stocks benefiting from a frenzy around artificial intelligence have helped drive this year’s gains for the stock market.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
Wall Street is rallying toward its best day since June on Wednesday as pressure that’s built up on stocks from the bond market relaxed a bit.
The S&P 500 was 1.1% higher in late trading, trimming its loss for what’s been a dismal August so far. The Dow Jones Industrial Average was up 173 points, or 0.5%, at 34,462 with a little less than an hour remaining in trading. The Nasdaq composite jumped 1.7%.
Big Tech stocks and others that benefit from easier interest rates led the way. They got some relief as the 10-year Treasury yield eased back further from its highest level since 2007 after a report suggested the U.S. economy may be cooling.
A 2.2% gain for Apple’s stock and 1.7% climb for Microsoft shares were two of the strongest forces pushing the S&P 500 upward.
Nvidia, another one of the market’s most influential stocks, rose 2.8% ahead of its latest profit report, scheduled to come out after the market closes for the day. It’s a pivotal test for the entire stock market because it could show whether the frenzy around artificial-intelligence technology that’s helped to lift Wall Street this year is deserved or overdone.
Expectations are immense after Nvidia stunned Wall Street three months ago by predicting it would make roughly $11 billion in revenue during the three months through July. That was nearly $4 billion more than analysts had been forecasting and would be a 64% leap from its numbers a year earlier.
The announcement set off a rush across Wall Street. Stocks of AI-related companies soared, and investors tried to count how many times a CEO could mention “AI” in an earnings call. Nvidia’s stock has more than tripled this year so far, and it will need to meet the much higher expectations around it to justify its big move.
Nvidia and a just a handful of other companies were behind the majority of the S&P 500’s gains earlier this year. Many of those “Magnificent Seven” stocks also benefited from the AI frenzy.
They’ve been under more pressure recently, as yields crank higher in the bond market. When bonds are paying more in interest, investors feel less need to pay high prices for stocks and other investments that can swing sharply in price.
Treasury yields eased Wednesday, taking off some of that pressure. The 10-year Treasury yield fell to 4.19% from 4.33% late Tuesday.
A preliminary reading of U.S. services and manufacturing businesses eased to a six-month low, sending yields lower across the bond market. The measure of output from S&P Global Market Intelligence still indicated growth, but less as inflation and higher interest rates bite into activity.
“A near-stalling of business activity in August raises doubts over the strength of US economic growth in the third quarter,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
For now, softer-than-expected data on the economy may be good for financial markets. That’s because a string of surprisingly strong reports recently has raised expectations for the Federal Reserve to keep interest rates higher for longer. The Fed has already hiked its main interest rate to the highest level since 2001 in hopes of grinding down high inflation.
High rates work by slowing the entire economy and hurting prices for investments, and they’ve helped inflation to ease since its peak above 9% last summer. But a still-solid job market and spending by U.S. households threaten to make it difficult for inflation to come down the last percentage point to the Fed’s target of 2%.
That’s why the main event of the week for markets could be a speech on Friday by Fed Chair Jerome Powell. He will be speaking at a Jackson Hole, Wyoming, event that’s been the setting for major policy announcements by the Fed in the past.
The hope among traders has been that the Fed has already hiked rates for the final time this cycle and that it will begin cutting rates early next year. But such hopes have been diminishing with each stronger-than-expected report on the economy that’s come in recently.
The two-year Treasury yield, which closely tracks expectations for the Fed, has also jumped recently, though it eased back like the 10-year yield on Wednesday. It fell to 4.93% from 5.05%.
On Wall Street, Advance Auto Parts rallied 3.4% after it named a new CEO and reported stronger revenue for the spring than analysts expected. Its profit, though, fell short.
Toll Brothers rose 3% after the homebuilder reported stronger profit than expected. It earlier had struggled as higher mortgage rates hurt the entire housing industry.
Foot Locker tumbled 29.7% after reporting weaker profit for the latest quarter than expected. The company also paused its dividend and cut its financial forecasts for the full year, describing a “still-tough consumer backdrop.”
Shares of companies that make products sold in Foot Locker stores were also weak. Nike fell 2.7%.
In markets abroad, stock indexes were mixed across Europe and Asia.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
