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Stocks Rally, Bonds Soar               09/28 16:10

   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.

   NEW YORK (AP) -- 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 10-year 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 short-term 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. Already, the housing industry 
has been hurt in particular as mortgage rates have jumped to their highest 
levels since 2008.

   A recession appears to be inevitable, according to Liz Ann Sonders, chief 
investment strategist at Charles Schwab. She points to several discouraging 
signals, including six straight months of contraction for an index of leading 
economic indicators. That hasn't happened since the beginning of the global 
financial crisis two recessions ago.

   Investment giant Vanguard puts the chance of a U.S. recession at 25% this 
year and at 65% next year on expectations for the Fed to keep hiking rates and 
to likely hold them at high levels through 2023.

   Besides the worries about higher rates from the Fed and other central banks, 
a litany of other pressures on the market are also lurking.

   Among them: Investors are worried that the stress caused by a huge run for 
the U.S. dollar's value against other currencies could make something crack 
somewhere in global markets. In Europe, tensions are rising even further amid 
Russia's invasion of Ukraine, with suspicions about sabotage to important 
natural gas pipelines the latest flashpoint. And profits for U.S. companies are 
under threat because of the slowing economy, high inflation and rising dollar.

   For Wednesday at least, though, the market seemed to be focused more on 
relief than such worries.

   "Investors got a sense that maybe central banks blinked, or at least the 
central bank of England blinked. That has led to lower rates" for longer-term 
U.S. bonds, said Jack Ablin, chief investment officer at Cresset. "And that has 
helped push stocks higher."

   Following the Bank of England's bond-buying announcement, the yield on the 
10-year U.S. Treasury sank sharply to 3.73% from 3.95% late Tuesday. In the 
U.K., the 10-year yield tumbled by roughly half a percentage point to a shade 
above 4%

   On Wall Street, a widespread rally saw nearly 35 stocks rise in the S&P 500 
index for every one that fell. Health care stocks helped lead the way following 
an encouraging update on a potential treatment for Alzheimer's disease.

   Japan's Eisai said its potential treatment appeared to slow the fatal 
disease in a late-stage study. Shares of Biogen, which will co-promote the 
drug, soared 39.9%.

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

   The S&P 500 rose 71.75 points to close at 3,719.04. The Dow gained 548.75 to 
29,683.74, and the Nasdaq climbed 222.13 to 11,051.64.

   Wall Street's rise came despite a 1.3% drop for Apple, which is the most 
influential stock in the S&P 500 because it's the largest. It was hurt by a 
report from Bloomberg that said soft demand for the latest iPhone model is 
pushing Apple to back off plans to increase production.

   Earlier in the morning, before the Bank of England's announcement, stocks 
across Asia fell. Hong Kong's Hang Seng lost 3.4%, South Korea's Kospi fell 
2.5% and Japan's Nikkei 225 dropped 1.5%. China's yuan also fell to a 14-year 
low against the dollar despite central bank efforts to stem the slide.

 
 
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