Stock Market Today: Dow Rose, Alibaba Soared, Okta Sank

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Stocks burst higher Tuesday, brushing off hawkish comments from Fed Chair Jerome Powell and a continued rise in bond yields. 

The

Dow Jones Industrial Average
gained 254 points, or 0.7%, while the

S&P 500
popped 1.1% and the technology-heavy Nasdaq Composite advanced 2%.

The Nasdaq has been particularly volatile this year, with Tuesday marking its 39th daily move of 1% or greater this quarter. That’s the most that type of move has happened in a quarter since the first quarter of 2009.

Stocks weren’t the only thing rising, however. The 2-year Treasury yield gained 0.05 percentage points to 2.17%, a new pandemic-era closing high, while the 10-year Treasury yield rose 0.09 percentage points to 2.38%, also a new pandemic-era closing high. Those records come a day after Fed chair Jerome Powell said the central bank would consider hiking rates in increments of a half a percentage point, rather than the standard quarter of a percentage point. The move is a sign that the Fed is serious about taming inflation. 

Rising rates and bond yields should be bad news for the stock market, but investors seem to be taking the increases in stride. “Equity traders are looking at surging global bond yields and are saying, [‘What, me worry?’]” wrote Edward Moya, senior market analyst at Oanda. “The global bond market selloff is not easing at all and that should raise some red flags.” 

This continues a bounce from a recent low point, as investors keep buying beaten-down shares. Since the S&P 500’s fall deep into correction territory—defined as a drop 10% or more from a high—the index has risen just over 8% from its 2022 low hit on March 8. Investors raised a lot of cash that they were eager to put to work as stock prices fell.

The rally in stocks still makes some sense, though. Economic growth is still expected to be strong, as real gross domestic product growth in the U.S. is still expected to be 3.6% this year and 2.3% in 2023, according to FactSet. “Equities have held up partly because the surge in 10yr yields is consistent with a strong economy and recession risk remains low over the 12 months,” wrote Dennis DeBusschere, founder of 22VResearch. 

Of course, the scary part is that financial markets are saying that there’s a higher probability that those estimates will soon come down. 

Tech stocks’ Tuesday surge also makes some sense. While higher long-dated bond yields make future profits less valuable⁠⁠⁠—and many fast-growing tech companies are valued on the basis that they’ll churn out sizable earnings figures many years in the future—the sector may already be reflecting much of this concept. When the Nasdaq entered trading on March 15, the index was in bear market, or at least 20% down from its all-time high. “Growth [stocks] has been beaten up so bad even with the rise in rates,” said Tyler Richey of Sevens Report Research. “So there’s a little bit of a catch up factor.”

For the S&P 500, the next tests will come at 4,500, which it’s now trying to break, and then as it nears the 4,600 level. Sellers have come in near the latter level twice this year to send the index lower again.

But even if the current rally stalls, it might not mean the end of the world. “The next levels of resistance that may be tested lie in the 4500 and 4600 areas,” writes Zev Spiro or Orips Research. “In the very near term, a consolidation or minor pull back would be healthy prior to higher levels.”

And while it’s possible the stock market has hit bottom—and has moved on from there—don’t expect a straight line upwards from here. “There are considerable concerns about economic growth,” said Jim Paulsen, chief investment strategist at The Leuthold Group.

Here are a handful of stocks on the move Tuesday:

Alibaba

(ticker: BABA) rose 11% in the U.S, and its Hong Kong stock gained more than 11% after the Chinese e-commerce giant announced that it would increase the size of its share buyback program to $25 billion from $15 billion.

Okta

(OKTA) slipped 1.8%, paring more severe losses, following news of a digital breach at the authentication service provider. Okta has said it is investigating the breach and CEO Todd McKinnon said via Twitter that there was no evidence of ongoing malicious activity.

Nike

(NKE) jumped 2.2% after the sporting goods giant reported better-than-expected quarterly profit late Monday, with strong product pricing offsetting headwinds from lower sales in China. The news also buoyed shares in competitor

Adidas

(ADS.Germany), which rose 1.5% in Frankfurt trading.

Altria Group

(MO) stock gained 2.1% after getting upgraded to Buy from Neutral at

Goldman Sachs
.
The bank downgraded competitor 

Philip Morris International

(PM) to Neutral from Buy. The stock fell 0.5%. 

Write to Jack Denton at [email protected]