U.S. stocks rebounded on Wednesday after two days of sharp market swings, as oil prices eased and fresh economic reports offered encouraging signals about the strength of the economy.
The S&P 500 rose 0.7% in morning trading and was on track to recover most of the losses recorded since the conflict with Iran began. The Dow Jones Industrial Average gained about 232 points, or 0.5%, while the Nasdaq Composite climbed 1.2% as of 10:50 a.m. Eastern time.
The gains followed a volatile start to the day in global markets. South Korea’s KOSPI plunged 12.1%, marking its worst decline on record. Ongoing uncertainty surrounding the conflict has caused sharp swings in financial markets throughout the week, with investors closely watching movements in oil prices.
Oil prices moderated as trading shifted from Asia to Europe. After briefly surpassing $84 per barrel, Brent Crude — the global oil benchmark — slipped 0.5% to $81.02 per barrel. Meanwhile, West Texas Intermediate Crude fell 0.5% to $74.15 per barrel.
Markets also found support from stronger-than-expected economic data. A report showed that business activity across U.S. service sectors such as real estate and finance expanded last month at the fastest pace since the summer of 2022. Importantly, the report also indicated that price pressures in these industries were rising at a slower pace, at least before the escalation of the Iran conflict.
Another report revealed that private-sector hiring in the U.S. grew more than economists had forecast. This could signal strength ahead of Friday’s official government employment report, which will provide a broader picture of the labor market.
Despite the rebound, investors remain cautious as they assess how long the conflict with Iran may last, how much higher oil prices could push inflation, and the potential impact on corporate profits.
Historically, U.S. markets have often recovered relatively quickly from military conflicts in the Middle East — provided that oil prices do not surge excessively. Some professional investors are therefore advising patience amid the current volatility.
On Wall Street, gains were led by several sectors. Crypto-related stocks rallied as Bitcoin rebounded toward $73,000. Shares of Coinbase Global surged 14.1%, while Robinhood Markets jumped 8.2%.
Retail and travel companies also moved higher amid optimism that a resilient economy and stabilizing gasoline prices could support consumer spending. Ross Stores gained 6.8%, and Expedia Group rose 3.1%.
Major technology companies also helped lift the broader market. Nvidia advanced 1.2%, while Amazon climbed 3.3%. Because of their massive market value, movements in these companies tend to have an outsized influence on the S&P 500.
Elsewhere, European markets rebounded after sharp losses in Asia. France’s CAC 40 rose 1.2%, and Germany’s DAX gained 1.8%. Earlier in Asia, Hong Kong’s Hang Seng Index dropped 2%, and Japan’s Nikkei 225 fell 3.6%, alongside South Korea’s historic decline.
In the bond market, U.S. Treasury yields moved slightly higher after earlier increases tied to inflation concerns. The yield on the U.S. 10-Year Treasury Note rose to 4.08%, up from 4.06% the previous day.
Strong economic reports have complicated the outlook for the Federal Reserve, which aims to maintain a healthy job market while keeping inflation under control. Rising oil prices could add further pressure to already elevated inflation levels.
As a result, the Fed may keep interest rates higher for longer to control inflation. However, elevated borrowing costs could weigh on both businesses and households, potentially slowing economic growth.
Before the escalation of the conflict, the central bank had been expected to resume cutting interest rates later this year. Now, traders are pushing back their expectations for when the Fed might begin easing policy again.
