Stocks Turn Higher After Tech-Led Selloff

On Tuesday, the Nasdaq recorded its largest one-day percentage decline since September 2020, while the Dow dropped more than 800 points, as investors digested earnings reports and weighed concerns about inflation, the prospect of rapid policy tightening by the Federal Reserve and the spread of Covid-19 in China.

Major U.S. stock indexes are down substantially for the year, with the S&P 500 down 12% and the Nasdaq Composite down 20%. On Tuesday, the Nasdaq closed at its lowest level since December 2020, wiping out the gains it notched in 2021. The Russell 2000 index of small-cap companies closed Tuesday at its lowest level since December 2020. 

Investors said they looked at Wednesday’s moves higher as a temporary relief rally.

“Stocks have been so weak so far this month I believe investors are seeing some value in the current pricing,” said

Tracie McMillion,

head of global asset allocation strategy at Wells Fargo Investment Institute.

Seema Shah,

chief strategist at Principal Global Investors, said she sees the next moves in the stock market as either sideways or down. 

Earnings are “supporting the market to some extent, but I don’t think it’s enough to support it higher,” Ms. Shah said. She said her team has moved to a neutral recommendation on their overall equity positions. 

“The risks are just piling up,” she said. “We don’t want to be picking up pennies in front of the steamroller.”

Many big companies are reporting earnings this week, with results due after Wednesday’s closing bell from companies including Facebook parent

Meta Platforms

and

Ford.

Twitter,

which this week agreed to sell itself for $44 billion to Elon Musk, is set to report Thursday.

Nearly 80% of S&P 500 companies that have reported earnings so far have surpassed analysts’ estimates,

FactSet

data show. Still,

Emily Roland,

co-chief investment strategist at John Hancock Investment Management, said investors remain focused on a number of wide-ranging issues weighing on markets.

“Markets are mostly focused on some of the macro concerns around aggressive tighter Fed policy, as well as this global growth scare that’s playing out,” she said.

Many of those concerns have driven the dollar to its highest level in more than two years. The dollar tends to strengthen when the global economy sours and when investors expect U.S. growth to outpace the rest of the world. Rising interest rates in the U.S. also typically benefit the greenback as higher rates attract yield-seeking investors to the currency. 

The ICE U.S. Dollar Index, which tracks the currency against a basket of others, rose 0.9% to 103.23, on pace to finish at its highest level since January 2017 and surpass even the coronavirus-induced market downturn of March 2020. Including Wednesday, the index has risen for all but two of April’s 18 trading sessions. 

In the bond market, the yield on the 10-year U.S. Treasury note rose to 2.805% on Wednesday from 2.773% on Tuesday. Recently, investors have sold bonds in anticipation of higher interest rates, and the yield on the benchmark note remains close to its highest level since 2018. Bond yields and prices move inversely.

Natural-gas prices in Europe rose 3.8%, after earlier leaping more than 20% on Wednesday. The moves came after Russia said it would halt gas flows to Poland and Bulgaria over their refusal to pay on Moscow’s new terms.

Among individual stocks,

Tesla

shares added 2.9%, on pace to recoup some of their losses after tumbling 12% Tuesday, its biggest one-day drop in more than a year. Twitter shares fell 3% to $48.26, about 11% below the $54.20 per-share-price that

Elon Musk

and Twitter agreed to in their deal to take the company private.

Boeing

shares were recently down 8.9%. The company posted a $1.24 billion quarterly loss and again pushed back the expected first delivery of its new 777X twin-aisle jet.

Microsoft

shares jumped 6.4% after the company on Tuesday reported higher revenue and profit last quarter as demand for its cloud services and software continued to climb. 

Chipotle Mexican Grill

shares added 1.9% after the burrito chain said total revenue increased 16% last quarter amid higher food, beverage and packaging costs—which the company said was partially offset by menu-price increases. 

Lucid Group

shares gained 3% after the company late Tuesday said the government of Saudi Arabia had agreed to purchase up to 100,000 vehicles over a 10-year period. 

Shares of Google parent

Alphabet

fell 3.7% after the technology behemoth posted slower sales growth amid disruptions in digital advertising spending.

Robinhood Markets

shares fell 5.1% after the online brokerage said it was laying off 9% of its full-time employees. The company is set to report earnings Thursday.

In commodities, Brent crude, the international benchmark for oil prices, fell 0.3% to $104.26 a barrel. 

Overseas, European stocks rose, with the Stoxx Europe 600 adding 0.5%. Major markets in Asia were mixed, with benchmarks in Japan and South Korea falling more than 1% and Chinese indexes gaining.

The CSI 300 index of the largest stocks listed in Shanghai and Shenzhen rose 2.9%, recouping some of its recent losses. In Hong Kong, the Hang Seng Index was up 0.1%.

The rebound came after China on Tuesday reported its lowest tally of Covid-19 cases in three weeks, and President

Xi Jinping

highlighted the importance of infrastructure for economic growth, singling out transport, energy and water conservation. Machinery and building-materials stocks jumped.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com, Dave Sebastian at dave.sebastian@wsj.com and Karen Langley at karen.langley@wsj.com