Rally brings broad-based gains to stock market

U.S. stocks gained in a broad-based rally as investors weighed the resilience of the economy against prospects for aggressive policy action to curb inflation. Treasury yields climbed across the curve, while oil fell on demand concerns.

The S&P 500 bounced back from the lowest close in more than a month, with all 11 main industry groups advancing except energy. The tech-heavy Nasdaq 100 jumped more than 2%, a threshold reached by the small-cap Russell 2000 index. Yields on short-end

Treasuries — the most sensitive to changes in interest rates — led the move higher.

Chicago Fed President Charles Evans said Tuesday that interest rates will probably rise above the neutral level. Investors, already betting on an almost half-point Federal Reserve rate increase next month, have been reassessing expectations after St. Louis Fed President James Bullard said hikes of as much as 75 basis points shouldn’t be ruled out. The last increase of such magnitude was in 1994.

“Generally, most markets are focused on how fast the Fed and other central banks are going to go, and ultimately what rates are going to take a breather at,” Brian Nick, chief investment strategist at Nuveen, said by phone. “Underlying all of this, though, is the fact that economic data still is quite solid. I would say it’s strong in the United States at this point.”

Government data on Tuesday showed U.S. housing starts rose unexpectedly in March to the highest level since 2006.

The earnings season continued Tuesday, with Johnson & Johnson gaining after reporting first-quarter earnings that beat estimates and raising its dividend. The advance comes despite the drugmaker cutting its annual profit forecast and suspending guidance for

COVID-19 vaccine sales.

So far, with just 48 companies in the S&P 500 reporting results, 79% have posted positive surprises, data compiled by Bloomberg show. On Monday, Bank of America Corp. joined a string of earnings beats by big lenders.

“The U.S. first-quarter earnings season, which continues this week, looks set to be positive, and we forecast earnings per share growth of 10% for 2022 overall and 7% for 2023,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

Oil retreated, snapping a four-day rally, as traders weighed the precarious demand outlook.