Wall Street rebounds as yields slip, focus on Fed path

© Reuters. A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 6, 2022. REUTERS/Brendan McDermid

By Sruthi Shankar and Ankika Biswas

(Reuters) - U.S. stock indexes climbed on Wednesday following a recent selloff as bond yields eased, while investor focus was squarely on the Federal Reserve's monetary policy tightening plans.

The technology-heavy Nasdaq led gains among the main indexes, looking to snap a seven-session losing streak. Apple Inc (NASDAQ:AAPL) edged up 0.2% ahead of the release of its new range of iPhone models and Apple Watches.

U.S. stocks have sold off sharply since mid-August after hawkish comments from Fed Chair Jerome Powell were compounded by signs of an economic slowdown in Europe and China and aggressive steps by major central banks to tame inflation.

Data signaling strength in the U.S. economy has prompted traders to bet on a 75-basis-point interest rate hike by the Fed later this month. Fed fund futures implied investors were pricing in a more than 80% chance of such a move.

The 10-year Treasury yield slipped from three-month highs hit earlier in the session, boosting shares of rate-sensitive stocks such as Tesla (NASDAQ:TSLA) Inc and Microsoft Corp (NASDAQ:MSFT). [US/]

"I would expect markets to be very volatile ... it's going to be a matter of what we hear from various central bankers this week and some of the incoming economic data," said Shawn Cruz, head trading strategist at TD Ameritrade in Chicago.

"Unless we get a sense that things are going to get dramatically worse on the economic front, you should probably expect 3,900 to be a little bit of a floor for the S&P 500."

Cleveland Federal Reserve Bank President Loretta Mester said the high cost of U.S. rental accommodation has not yet fully filtered through to inflation measures, suggesting inflation may still rise further.

Meanwhile, Richmond Fed President Thomas Barkin said the U.S. central bank must lift interest rates to a level that restrains economic activity and keep them there until policymakers are "convinced" that inflation is subsiding.

Focus will be on Powell's speech on Thursday and U.S. consumer price data next week for clues on the path of monetary policy.

The Fed's "Beige Book", a periodic snapshot of the health of the U.S. economy, will be released at 2:00 p.m. ET for further clues on the central bank's monetary policy tightening plans.

At 12:13 p.m. ET, the Dow Jones Industrial Average was up 206.61 points, or 0.66%, at 31,351.91, the S&P 500 was up 32.62 points, or 0.83%, at 3,940.81, and the Nasdaq Composite was up 115.95 points, or 1.00%, at 11,660.86.

Ten of the 11 major S&P sectors were trading higher, led by a 2% jump in utilities, reflecting the defensive positioning by investors due to economic uncertainties.

The energy index fell 1.6% as oil prices tumbled almost 4% on demand worries related to looming recession risks. Brent crude fell below $90 a barrel. [O/R]

Nio (NYSE:NIO) Inc fell 2.6% after the Chinese electric vehicle maker reported a bigger second-quarter adjusted net loss.

Coupa Software (NASDAQ:COUP) Inc jumped 14% after the payment management software firm beat second-quarter estimates for revenue and profit.

Advancing issues outnumbered decliners for a 2.04-to-1 ratio on the NYSE and a 1.74-to-1 ratio on the Nasdaq.

The S&P index recorded four new 52-week highs and 16 new lows, while the Nasdaq recorded nine new highs and 193 new lows.