Nasdaq leads S&P 500, Dow Jones higher amid rebound in growth stocks

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Bouncing back after a recent downdraft that took the S&P 500 and the Nasdaq to their lowest levels since mid-March, stocks showed gains on Wednesday. Growth sectors helped drive the major averages higher, as investors geared up for earnings season.

The Nasdaq (COMP.IND) led all the broader indices higher, +2.0%. Meanwhile, the S&P (SP500) closed +1.1% and Dow (DJI) was +1.0%.

Looking at the day’s closing numbers, the Nasdaq rose 272.02 points to finish at 13,643.59. The S&P 500 advanced 49.14 points to conclude trading at 4,446.59 — rising back above the 4,400 mark. The Dow ended at 34,564.59, a gain of 344.23 points on the session.

Nine of 11 S&P sectors ended higher, led by the megacap homes: Consumer Discretionary, Info Tech, and Communication Services. Materials also showed substantial gains.

Financials were one of the two declining sectors, edging lower along with Utilities. J.P. Morgan lost ground after the company reported mixed earnings that missed on the bottom line. Investment banking revenue was light and there were concerns about loan growth.

The yield curve basically held steady, following a steepening that has taken place recently. The 10-year Treasury yield slid 2 basis points to 2.70% and the 2-year also fell 3 basis points to 2.36%.

“10s-2s now has traded into the middle of the 30-40 basis points range we think represents resistance, and we will be very interested to see if it can get through 40 bps on a sustainable basis,” Tom Essaye of Kinsale Trading said. “If it can’t, we’d be inclined to view this steepening as a technical correction following the quick flattening in the yield curve we saw over the past several weeks.”

He added: “However, if 10s-2s can get through 40 bps sustainably (meaning for several trading days) then I will take that as a sign that the bond market is calling the Fed’s bluff, and that when economic growth slows, likely much sooner than later, the Fed will abandon its hawkish stance and the Fed Put will be back in play. If that’s the case, it’s bullish for stocks and other assets and we would react accordingly.”

In economic news, the March PPI came in at an annual rate of 11.2%, while the core PPI came in at 9.2%, both hotter than forecasts. This followed consumer price data released the day before, which showed an 8.5% print for annual gains.

“In one line: Ouch,” Pantheon Macro said of the wholesale inflation stats. “We feared upside risk in the core, but the 1.0% jump was bigger than we expected. The core was pushed up by another surge in trade services – margins – which rose 1.2%; that was the fifth straight 1%-plus increase.”

The firm added: “Core PPI inflation probably has now peaked, at 9.2%, but the speed of the downturn over the next few months is uncertain; serious supply chain problems persist and the absence of precedent makes it hard to forecast the pace of margin compression with much confidence. Still, the worst is over.”

Among active stocks, AbbVie dragged on the S&P after the president stepped down.

Airlines, on the other hand, showed up at the top of the gainers’ list after Delta’s earnings boosted hopes of strong summer travel demand.