U.S. stocks gained in a broad-based rally as investors weighed the resilience of the economy against prospects for aggressive policy action to curb inflation. Treasury yields climbed across the curve, while oil fell on demand concerns.

The S&P 500 bounced back from the lowest close in more than a month, with all 11 main industry groups advancing except energy. The tech-heavy Nasdaq 100 jumped more than 2 per cent, a threshold reached by the small-cap Russell 2000 index. Yields on short-end Treasuries -- the most sensitive to changes in interest rates -- led the move higher. 

Netflix Inc. tumbled in after-hours trading after the streaming service lost 200,000 customers in the first quarter and projected losing another 2 million customers in the current second quarter. Shares of streaming-video companies such as Walt Disney Co. and Roku Inc. also retreated. 

International Business Machines Corp. gained in the post-market after reporting sales that topped estimates on strong demand for its hybrid-cloud offerings.

Chicago Fed President Charles Evans said Tuesday that interest rates will probably rise above the neutral level. Investors, already betting on an almost half-point Federal Reserve rate increase next month, have been reassessing expectations after St. Louis Fed President James Bullard said hikes of as much as 75 basis points shouldn’t be ruled out. The last increase of such magnitude was in 1994. 

“Generally, most markets are focused on how fast the Fed and other central banks are going to go, and ultimately what rates are going to take a breather at,” Brian Nick, chief investment strategist at Nuveen, said by phone. “Underlying all of this, though, is the fact that economic data still is quite solid. I would say it’s strong in the United States at this point.”

Government data on Tuesday showed U.S. housing starts rose unexpectedly in March to the highest level since 2006.

The earnings season continued Tuesday, with Johnson & Johnson gaining after reporting first-quarter earnings that beat estimates and raising its dividend. The advance comes despite the drugmaker cutting its annual profit forecast and suspending guidance for COVID-19 vaccine sales. 

So far, with just 48 companies in the S&P 500 reporting results as of the close of trading Tuesday, 79 per cent posted positive surprises, data compiled by Bloomberg show. On Monday, Bank of America Corp. joined a string of earnings beats by big lenders.

“The U.S. first-quarter earnings season, which continues this week, looks set to be positive, and we forecast earnings per share growth of 10 per cent for 2022 overall and 7 per cent for 2023,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “Against this backdrop, investors should also seek long-term value in stocks. Periods of heightened market volatility and uncertainty can often lead to attractive longer-term entry points in areas of structural growth.”

Oil retreated, snapping a four-day rally, as traders weighed the precarious demand outlook. Copper rose with other base metals as disruptions at mines in Peru added to worries about tight supplies at a time when inventories are at alarmingly low levels.

Disruptions to supply chains from China’s lockdowns and to commodity flows from the war in Ukraine have kept pressure on central banks to rein in runaway prices at a time when global growth is tipped to slow. The International Monetary Fund slashed its world growth forecast by the most since the early months of the pandemic, and projected even faster inflation. 

Russia has launched what Foreign Minister Sergei Lavrov hailed as a second phase of the war in Ukraine, and early indications are it could go better for Russia than the first. 

What to watch this week:

• Earnings include American Express, China Telecom, IBM, Netflix, Tesla
• EIA crude oil inventory report, Wednesday
• China loan prime rates, Wednesday
• Federal Reserve Beige Book, Wednesday
• French presidential election debate, Wednesday
• San Francisco Fed President Mary Daly, Chicago Fed President Charles Evans, due to speak, Wednesday
• Euro zone CPI, U.S. initial jobless claims, Thursday
• Fed Chair Jerome Powell, ECB President Christine Lagarde discuss global economy at IMF event, Thursday
• Manufacturing PMIs: Euro zone, France, Germany, U.K, Friday
• Bank of England’s Andrew Bailey to speak, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1.6 per cent as of 4 p.m. New York time
• The Nasdaq 100 rose 2.2 per cent
• The Dow Jones Industrial Average rose 1.5 per cent
• The MSCI World index rose 0.8 per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.4 per cent
• The euro was little changed at US$1.0788
• The British pound fell 0.1 per cent to US$1.3000
• The Japanese yen fell 1.5 per cent to 128.89 per dollar

Bonds

• The yield on 10-year Treasuries advanced nine basis points to 2.94 per cent
• Germany’s 10-year yield advanced seven basis points to 0.91 per cent
• Britain’s 10-year yield advanced eight basis points to 1.97 per cent

Commodities

• West Texas Intermediate crude fell 5.2 per cent to US$102.53 a barrel
• Gold futures fell 1.8 per cent to US$1,949.80 an ounce