U.S. stocks jumped on Wednesday, as lower bond yields triggered a rebound in utilities and other shares sensitive to interest rates, while signs of strength in the economy reassured investors.
The Dow posted its best day since July after data signaled strength in U.S. consumer spending and a Federal Reserve report showed no increase in wage pressures while the economy grew last month. That helped lift the shares of industrial companies like 3M and Caterpillar Inc., which also raised its dividend.
The benchmark 10-year U.S. Treasury note's yield retreated from five-year highs a day after concerns about rising interest rates drove a stock market sell-off. The S&P utilities index climbed 2 percent.
As long as long yields aren't making a run for higher levels, it makes sense that people are dipping their toes back into stocks again, said David Bianco, chief equity strategist at UBS AG in New York.
The Dow Jones industrial average surged 187.34 points, or 1.41 percent, to end at 13,482.35. The Standard & Poor's 500 Index gained 22.67 points, or 1.52 percent, to finish at 1,515.67. The Nasdaq Composite Index shot up 32.54 points, or 1.28 percent, to close at 2,582.31. It was the best day for the S&P 500 and the Nasdaq in nearly three months.
The 10-year U.S. Treasury note rose 20/32 in price, pushing the yield down to 5.208 percent.
Soaring bond yields had raised concerns that higher borrowing costs would slow takeover activity and profit growth -- two engines of the market's spring rally.
U.S. retail sales rebounded by an unexpectedly strong 1.4 percent in May as consumers shrugged off higher gasoline prices and boosted spending on cars, clothing and building materials, while import prices rose in May for the fourth straight month on higher oil costs, according to government reports.
I think the data has been showing that the economy is not too hot and it's not too soft. We've gone from fears of a recession to fears that things are too strong, mainly because of the global exposure. Perhaps we have found the middle of the road here, Bianco said.
Higher oil prices prompted investors to buy Exxon Mobil Corp. and shares of other major energy producers. U.S. crude for July delivery rose 91 cents to settle at $66.26 a barrel after U.S. government data showed no change in gasoline stockpiles in the latest week. Exxon's stock was up 1.7 percent at $83.35, while Schlumberger gained 4.1 percent to close at $81.96 on the New York Stock Exchange.
Exxon contributed the most to the S&P 500's advance.
Financial shares, which are also sensitive to borrowing costs, gained sharply. The S&P index of financial companies and banks jumped 1.8 percent, with Citigroup up 2.1 percent at $53.68.
Shares of 3M shot up 2.5 percent to $87.19 on the NYSE. Caterpillar gained 2.4 percent to $79.93.
Shares of chip makers also rebounded, with Qualcomm Inc. among the Nasdaq's biggest advancers. Qualcomm's stock gained 1.9 percent to $42.60 a day after worries about tech spending and a profit warning from Texas Instruments Inc. hit the sector. The Philadelphia Stock Exchange index of semiconductors rose 1.4 percent.
Trading was moderate on the NYSE, with about 1.59 billion shares changing hands, below last year's estimated daily average of 1.84 billion. On the Nasdaq, about 2.15 billion shares traded, above last year's daily average of 2.02 billion.
Advancing stocks outnumbered declining ones by a ratio of about 9 to 2 on the NYSE and by 2 to 1 on Nasdaq.