Stocks rose on Wednesday, bouncing off a drop the day before, ahead of the release of the Federal Reserve’s latest policy statement.
The rally was led by technology stocks, which had been particularly hard hit in a recent wave of selling, after Microsoft reported better-than-expected profits on Tuesday.
The S&P 500 climbed 1.8 percent in midday trading, while the Nasdaq composite was up about 2.7 percent. The gains come in the middle of a remarkably volatile week that has seen major indexes swing between gains and losses as Fed officials discussed their plans to pull back on its support for the economy.
“They need to be careful to find the right balance between taking inflation seriously and not overdoing it,” Craig Erlam, a senior market analyst at OANDA, wrote in a note about the Fed. “These markets will be easily spooked, so today is all about finding just the right balance.”
The uncertainty over the Fed’s next moves and the prospect of higher interest rates soon has made markets volatile all month, dampening enthusiasm for stocks and pushing major indexes sharply lower.
The S&P 500 is now about 7 percent below its Jan. 3 high and has flirted with a correction, a Wall Street term for a fall of 10 percent. A drop of that size is an infrequent occurrence and serves as a signal that investors have turned more pessimistic about the market. The tech-heavy Nasdaq composite is down about 11 percent for the year.
On Wednesday, shares of Microsoft were up about 4.8 percent after the company reported its profit rose 21 percent in the last three months of 2021 from a year earlier, to $18.8 billion.
The gains made it one of the best-performing stocks in the S&P 500. Also higher was the semiconductor maker Texas Instruments, which rose 4 percent after it issued a better-than-expected forecast for the year. Several other chip makers were rallied as well. Alphabet, Google’s parent, gained more than 3 percent on Wednesday.
The electric vehicle maker Tesla will report its financial performance report for the last three months after the markets close on Wednesday. Tesla has mostly dodged the global chip shortage that hampered production for other carmakers, managing to increase its deliveries by 87 percent from the year before, the company said in early January.
Oil prices were higher, with Brent crude, the international standard, up 2.4 percent to $90 a barrel. Futures for West Texas Intermediate rose to their highest levels since October 2014, up more than 2 percent to $87.44 a barrel.
Rising oil prices suggest that investors believe the global economy isn’t headed for a significant slowdown, which would reduce demand.
But a shortage of natural gas, particularly in Europe, has also helped drive the rally, along with fears of war in Ukraine, which could disrupt Russia’s supply of energy to world markets. Russia has amassed thousands of troops on the border of Ukraine, creating the threat of an invasion. The White House is considering deploying several thousand U.S. troops, as well as warships and aircraft, to NATO allies in the Baltics and Eastern Europe.
“It’s still unlikely that oil and gas will be used as a weapon any time soon, but if it was, it could lead to a serious surge in prices given how tight the markets are,” said Mr. Erlam, the OANDA analyst.
The rise in oil prices has also pushed energy stocks higher, with Occidental Petroleum up more than 3 percent on Wednesday, while Devon Energy and Enphase Energy gained more than 2 percent.
