Bond markets around the world are relaxing Wednesday after London’s central bank pledged to do whatever’s needed to restore calm in its financial markets.
The move comes amid heightened concerns about the potential for economies worldwide slipping into a recession as the hottest inflation in decades burns businesses and consumers.
Stocks in the U.S. gained ground after wavering earlier in trading. Major indexes remain volatile amid recession risks and a long list of other worries. The S&P 500 rose 1.5% as of 12:52 p.m. Eastern. The Dow Jones Industrial Average rose 447 points, or 1.5%, to 29,585 and the Nasdaq rose 1.3%.
Smaller company stocks charged past the broader market. The Russell 2000 rose 2.6%.
The yield on the 10-year U.S. Treasury fell sharply to 3.77% from 3.95% late Tuesday, part of a global retreat in yields after the Bank of England said it would buy U.K. government bonds following a recent sell-off. U.K. bonds and the British pound had been plunging on worries that a U.K.. government plan to cut taxes would lead to worse inflation.
European markets were mostly higher after shaking off an earlier stumble.
Markets in Asia tumbled after China’s yuan fell to a 14-year low against the dollar despite central bank efforts to stem the slide. U.S. interest rate hikes have prompted traders to convert money into dollars in search of higher returns.
Stubbornly hot inflation has prompted central banks around the world to raise interest rates and the Fed has been particularly aggressive. It raised its benchmark rate, which affects many consumer and business loans, again last week. It now sits at a range of 3% to 3.25%, but was near zero at the start of the year.
The Fed also has released a forecast suggesting its benchmark rate could be 4.4% by the year’s end, a full percentage point higher than it envisioned in June.
Wall Street is worried that the Fed will hit the brakes too hard on an already slowing economy and veer it into a recession. The concerns have been global, with the head of the European Central Bank and others this week warning that high energy and food prices are sapping consumer spending and economic growth.
Higher interest rates have been weighing on stocks, especially pricier technology companies, which tend to look less attractive to investors as rates rise.
Rising interest rates in the U.S. have also helped boost the U.S. dollar’s value and weigh down currencies globally. That could eventually dent profits for U.S. companies with overseas businesses and put a financial squeeze on much of the developing world.
U.S. markets have been volatile since the Fed raised interest rates last week. Investors are closely watching the latest economic updates for more clarity on the how consumers are handling high prices on everything from food to clothing. A report on Tuesday showed that consumers remained confident in September as gas prices continued falling.
Gas prices rose along with surging oil prices earlier this year and fueled already hot inflation. U.S. crude oil prices rose 4.3% on Wednesday, but have fallen more than 12% in September.
Consumer spending has remained a strong area of the economy, along with employment and updates on both are on tap for later in the week. The government will release its latest weekly unemployment report on Thursday and an update on personal income and spending, for August, on Friday.
Wall Street is also preparing for the next round of corporate earnings reports as the third quarter comes to a close. Many companies have been warning that inflation remains a threat to profits. Meanwhile, company and industry news helped move several stocks on Wednesday.
Biogen surged 37% following an encouraging update on a potential Alzheimer’s disease treatment. Apple slipped 2.7% on reports that it planned to temper its iPhone production.
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