Global Stock Market

Stocks Turn Higher After Two Days of Declines

U.S. stocks bounced higher after two consecutive days of declines.

The S&P 500 was recently up 0.4%. The tech-heavy Nasdaq Composite added 0.4%. The Dow Jones Industrial Average added about 175 points, or 0.5%.

Investors had recently put the brakes on what had been a furious rally in stocks in recent weeks, leaving the major indexes hovering near records. Some of the caution toward stocks eased on Wednesday, as major indexes edged higher and recouped some of their losses.

The retreat in U.S. stocks this week is simply a “normal pause” in a bull market, with investors taking the opportunity to book profits and reassess their risk appetite, said

Luca Paolini,

chief strategist at Pictet Asset Management. “As long as the U.S. economy is strong, it’s not really worth the risk of betting against the equity market.”

Investors are also closely monitoring earnings to see if the current valuations of expensive stocks can be justified.

Chipotle Mexican Grill

is among companies that will post results after the New York closing bell.

“We expect earnings to surprise on the upside, but the risks are asymmetric. In an environment where markets are at record highs, any company that doesn’t deliver is really punished,” said Mr. Paolini. “Over the next few months the direction of earnings will determine the direction of the market.”

Netflix

shares were the biggest loser in the S&P 500 on Wednesday after the company said subscriber growth for the first quarter was weaker than expected. The company’s shares fell 7.9%.

In bond markets, the 10-year U.S. Treasury yield edged up to 1.573%, from 1.562% on Tuesday. Yields rise as prices fall.

A new wave of Covid-19 infections is sweeping through a number of countries including India and Japan, raising the prospect of fresh hurdles to the anticipated global economic rebound. Health authorities are also warning that new variants may emerge that are resistant to the existing batch of coronavirus vaccines.

“There are still risks in this market, particularly as it relates to the vaccine rollout and virus mutations,” said Shoqat Bunglawala, head of international multiasset investments at Goldman Sachs Asset Management. “We’re still likely to be in an environment with some volatility.”

Overseas, the pan-continental Stoxx Europe 600 ticked 0.4% higher after its biggest one-day drop since late December.

In Asia, most major stock indexes closed lower. Japan’s Nikkei 225 fell 2%, while Hong Kong’s Hang Seng declined 1.8%. The Shanghai Composite Index ended the day relatively flat.

Investors are looking to results to gauge whether high equity valuations are justified.



Photo:

Courtney Crow/Associated Press

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com

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