Stocks rally; U.K. move calms markets

NEW YORK — Stocks rallied on Wall Street to their first gain in more than a week, as some calm returned to markets around the world Wednesday after the Bank of England moved forcefully to get a budding financial crisis there under control.

The S&P 500 jumped 2% for its best day in seven weeks to snap its longest losing streak since the coronavirus crash in February 2020. Besides the relief on Wall Street, bond markets around the world also relaxed and European stocks erased morning losses after the U.K. central bank said it would buy however many U.K. government bonds are needed to restore order to its financial markets.

The drop in bond yields eased some of the pressure that’s been choking Wall Street this year, and the Dow Jones Industrial Average rallied 1.9%. The Nasdaq composite climbed 2.1%, and the smaller stocks that make up the Russell 2000 index soared even more, 3.2%.

The moves helped markets recover recent losses triggered by turmoil in U.K. financial markets. After the government there announced a sweeping set of tax cuts, investors worried the attempts to goose the U.K. economy could push already high inflation even higher. That caused the value of the British pound to plunge and bond yields globally to jump.

Despite Wednesday’s rally, the U.S. stock market is still down more than 20% from its record set early this year and remains near its lowest point since late 2020. Analysts say more turbulence is likely ahead as worries about a possible recession, higher interest rates and even higher inflation continue to hang over Wall Street.

Underscoring those concerns, the yield on the 10year U.S. Treasury briefly topped 4% Wednesday morning to touch its highest level in more than a decade. It’s been on a swift surge along with other Treasury yields as the Federal Reserve jacks up shortterm interest rates at the fastest pace in decades.

By raising rates, the Fed is hoping to slow the economy enough to force down the high inflation that’s hammering the economy. But it risks creating a recession if it takes rates too high too quickly. The housing industry has been hurt in particular as mortgage rates have jumped to their highest levels since 2008.

Stocks of energy producers were also strong after crude oil prices recovered some of their steep recent losses caused by recession worries.