At 2:19 p.m. ET, the Dow Jones Industrial Average traded 63 points higher, well off its session high. The 30-stock index rose as much as 279.46 points earlier in the day. The S&P 500 was up 0.4 percent after trading 1.1 percent higher. The Nasdaq Composite gained 0.3 percent.
The major average pared their gains along with the benchmark 10-year Treasury yield. The benchmark rate sat at 2.409 percent in afternoon trading, about 5 basis points below its session high. That move comes a day after reaching its lowest level since December 2017. The 10-year’s decline caused a so-called yield-curve inversion as the 3-month Treasury bill yield moved above the benchmark rate. Investors see a yield-curve inversion as a signal that a recession may be on the horizon, so a rise in long-term rates is being viewed as a positive right now.
The yield curve inverted amid the release of weak economic data from the U.S. and around the world as well as a downgraded U.S. economic outlook from the Federal Reserve.
“There’s lots of angst about global economic growth. That’s understandable because it has been slowing significantly since early 2018,” Ed Yardeni, president and chief investment strategist at Yardeni Research, wrote in a note. “Furthermore, we can all observe that ultra-easy monetary and debt-financed fiscal policies aren’t as stimulative as policymakers have been hoping.”
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The Dow closed Monday with a small gain. News that special counsel Robert Mueller did not find evidence that President Donald Trump colluded with Russia in the 2016 presidential race bolstered the markets by removing some uncertainty. Investors were also hopeful that with the Mueller investigation out of the way, Trump will turn his attention to cementing trade deals.
However, concerns regarding the global economy capped market gains in the broader market.
“Expectations are for a pretty weak first quarter overseas to go along with a fairly weak U.S.,” said Sam Stovall, chief investment strategist at CFRA Research. “The real question is whether it’s just a weak first quarter and then it recovers. Our expectation right now is that it is more of a soft landing.”
“I think we’re just going through a pretty healthy digestion of gains,” Stovall said. “Q1 softness will probably be followed by a recovery in Q2, both on an economic perspective as well as an earnings outlook. I would tell investors you are probably better off buying than you are bailing.”
Equities rallied to start off 2019, with the S&P 500 rising more than 11 percent year to date.
Shares of Bed Bath & Beyond skyrocketed more than 22 percent after The Wall Street Journal reported three activist investors are trying to replace the company’s entire board of directors.
Nvidia shares rose 0.9 percent after Piper Jaffray initiated coverage of the chipmaker with an overweight rating, noting its attractive valuation.