Market Recap | S&P 500 hangs onto gains while bond yields rise

 The $S&P 500 index(.SPX.US)$ rose Tuesday as gains by cyclical stocks helped overcome losses in technology shares.

Rising bond yields and expectations for economic growth powered shares of energy and financial companies while weighing on the growth stocks that have lifted the market in recent months.

The broad U.S. stock index gained 7.76 points, or 0.2%, to 4690.70. The $Dow Jones Industrial Average(.DJI.US)$ added 194.55 points, or 0.5%, to 35813.80. The $Nasdaq Composite Index(.IXIC.US)$ fell 79.62 points, or 0.5%, to 15775.14

Focus on the continuing economic recovery and expectations for rising interest rates has dented the outlook for tech stocks, which often trade at high prices based on expectations of growth far into the future. Higher rates reduce the value of those far-off earnings, while broader growth increases the relative attractiveness of economically sensitive parts of the market.

$Microsoft(MSFT.US)$ declined $2.15, or 0.6%, to $337.68, and shares of $Meta Platforms(FB.US)$, formerly called Facebook, dropped $3.76, or 1.1%, to $337.25. Energy and financial stocks gained ground, with $Exxon Mobil(XOM.US)$ shares rising $1.62, or 2.6%, to $63.13 and $Jpmorgan Chase & Co.(AMJ.US)$shares adding $3.93, or 2.4%, to $168.28.

President Biden's selection of Jerome Powell for a second term leading the central bank signaled continuity in U.S. economic policy. Federal Reserve officials in the coming months will debate how soon to raise interest rates, trying to avoid either overreacting and cooling the economy or underreacting and allowing inflation to rise out of control.

With good economic growth and without a policy mistake, I believe the more cyclical areas of the market could continue to do well, versus what has done well, which is more those technology stocks" 

-John Bailer, deputy head of equity income at Newton Investment Management.

Bond yields continued to rise Tuesday, with investors pricing in more certainty for the Fed's plans to taper asset purchases and hike rates in the near future. The yield on the benchmark 10-year U.S. Treasury note rose to 1.665%, up from 1.625% Monday.

U.S. stocks have rallied in recent weeks on a strong corporate earnings season. With the bulk of financial results in, analysts expect that profits from S&P 500 companies rose 40% in the third quarter from a year earlier.

Individual stocks moved Tuesday on earnings news.  $Zoom Video Communications(ZM.US)$shares tumbled $35.64, or 15%, to $206.64 after the videoconferencing company reported a slowdown in revenue growth. $Best Buy(BBY.US)$ shares fell $16.99, or 12%, to $121.01 after the electronics retailer also posted lackluster sales growth. Shares of $JM Smucker(SJM.US)$ gained $7.19, or 5.7%, to $133.63 after the food maker raised its earnings forecast.

With most of the reporting season in the books, investors are in a quieter period for new information about companies. David Bahnsen, chief investment officer at wealth management firm The Bahnsen Group, is looking ahead to the fourth-quarter earnings season that will kick off early next year.

Fundamentals are going to drive the next leg of the market, either because earnings outperform expectations yet again, or because they don't." 

-David Bahnsen

Oil prices oscillated after the White House said the U.S., China, Japan, and other countries would tap strategic oil reserves in a bid to temper gasoline prices and inflation. Global benchmark Brent crude rose 3.3% for the day.

What matters for the price is how much oil we have above ground, and releasing oil from strategic reserves actually reduces this. It is very temporary, it's not very effective and it can so easily be countered by OPEC+ if they reduce exports a little bit."

- Bjarne Schieldrop, chief commodities analyst at Nordic bank SEB.

Overseas, the Turkish lira weakened further. President Recep Tayyip Erdogan reiterated his views on interest rates and inflation on Monday, exerting further pressure on the Turkish central bank.

The pan-continental Stoxx Europe 600 declined 1.3%. An uptick in Covid-19 cases and renewed restrictions in Austria and Germany are weighing on market sentiment in Europe.

In Asia, major benchmarks were mixed. The Shanghai Composite Index added 0.2%. Hong Kong's Hang Seng Index declined 1.2%, weighed down by declines in technology stocks.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Karen Langley at karen.langley@wsj.com

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